Natura Brazil
Rod. Anhanguera - Km 30,5
07750-000 Cajamar - SP
Tel.: +55 (11) 4446 2000
Natura Argentina
Av. del Libertador, 1295 - 1º piso
Vicente López
C1112ABC Capital Federal
Tel.: +54 (11) 4837 6100
Natura Chile
Cordiller 321 – B6
Quilicura Santiago
Tel.: +56 (2) 595 9200
Natura Colombia
Calle 76 Nº 9 – 66
Bairro es Nogal
Bogotá D.C.
Tel.: +57 (1) 326 8787
Natura France
55, Av. Victor Hugo
75116 Paris
Tel.: +33 (1) 5364 2100
Natura Mexico
Ave. Homero, 823
Col. Polanco
C.P. 11550 - Del. Miguel Hidalgo
México D. F.
Tel.: +52 (55) 5250 9030
Natura Peru
Av. del Ejército, 801
Miraflores - Lima
Tel.: +51 (1) 440 1362
Natura Venezuela
Av. Francisco de Miranda
com Av. Homero Yslar Pietri
Torre Metalica – Piso 11
1060 – Chacao – Caracas
Tel.: +58 (212) 610 1111
8
0
0
2
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
annual report
natura
2008
Table of Contents
Reason for Being, Vision and Beliefs 2
Message from Management 4
Profile 7
Natura’s Operations
High-Priority Sustainability Topics
Natura Value Chain
Development of Our Commitments
About this Report
Main Events in 2008
Strategy and Management 15
Corporate Governance 19
Social Performance 23
Quality of Relationships
Ombudsman’s Office
Employees
Consultants
Suppliers
Supplier Communities
Consumers
Surrounding Communities
Government
Shareholders
Creation of Social Value
Environmental Performance 49
Economic Performance 55
Financial Statements 59
DNV Report 87
About the Report 89
GRI Index 91
Cynthia Krahenbuhl, 31,
lawyer and a Natura customer
Reason for Being
Our Reason for Being is to create
and sell products and services that
promote well-being/being well.
Well-being
is the harmonious,
pleasant relationship of a person
with oneself, with one’s body.
Being well
is the empathetic, successful,
and gratifying relationship of
a person with others, with nature
and with the whole.
Vision
Because of its corporate behavior, the
quality of the relationships it establishes
and the quality of its products and
services, Natura will be an international
brand, identified with the community
of people who are committed to
building a better world, based
on better relationships among
themselves, with others, with
nature of which they are part,
with the whole.
Beliefs
Life is a chain of relationships.
Nothing in the universe exists alone.
Everything is interdependent.
We believe that valuing relationships
is the foundation of an enormous human
revolution in the search for peace,
solidarity, and life in all of its manifestations.
Continuously striving for improvement
develops individuals, organizations,
and society.
Commitment to the truth is the route
to perfecting the quality of relationships.
The greater the diversity, the greater the
wealth and vitality of the whole system.
The search for beauty, which is the
genuine aspiration of every human
being, must be free of preconceived
ideas and manipulation.
The company, a living organism, is a
dynamic set of relationships. Its value
and longevity are connected to its
ability to contribute to the evolution
of society.
Juliana Michelin, 30, and Luzinete Costa Martins, 24,
Natura Employees
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
3 3
Message from
Management
CHANGING TIMES
THE WINDS OF CHANGE THAT BLEW
THROUGH OUR WORLD IN 2008 COMBINED
THE FORCES OF HURRICANES, TYPHOONS,
AND TSUNAMIS, MAKING IT A YEAR OF
TURBULENCE, EXPOSING PREVIOUSLY
DISGUISED SYSTEMIC WEAKNESSES AND
CAUSING US TO QUESTION PREVIOUSLY
UNQUESTIONED TRUTHS.
AS A SIGNAL THAT THIS CAN BE A VERY
CONSTRUCTIVE MOMENT, WE HAVE
WITNESSED THE EMERGENCE OF A NEW
VOICE IN THE VERY COUNTRY THAT WAS HIT
BY THE HURRICANE, CRYING OUT FOR
CHANGE, DENOUNCING ALIENATION, AND
OFFERING MORE HUMANIST AND UNIVERSAL
VISIONS AND ASPIRATIONS.
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
04 05
This wind has aroused a great hope in the
international community, which has shown a
growing concern with climate change, social
inequalities, and planetary challenges. In this
summary, we can see the backdrop of what
we have been experiencing in the world,
especially last year.
We at Natura see the crisis as perhaps
representing – through a turn toward
sustainability - the beginning of a profound
change in the process of civilization, a new
cycle, a slow and inexorable reversal of the
threats to the future of life on Earth.
This extraordinary year found Natura not only
strengthened by our Beliefs and Values, but also
reinvigorated by the results of the action plans
and in-depth reorganization we put into place
at the start of 2008. The financial results, the
increase in the number of our consultants
(sales representatives), and the strengthening
of our brand are all clear evidence of this.
However, in this year of such significant results,
we did not achieve the ideal level of services
to our consultants and consumers. We are
commited to doing everything necessary to see
to it that the quality of our products and services
continues to be the basis of Natura’s reputation.
From left to right:
Pedro Passos, Alessandro Carlucci, Luiz Seabra and Guilherme Leal
Antonio Luiz da Cunha Seabra
Co-Chairman of the Board
of Directors
Guilherme Peirão Leal
Co-Chairman of the Board
of Directors
Pedro Luiz Barreiros Passos
Co-Chairman of the Board
of Directors
Alessandro Giuseppe Carlucci
CEO
Our operations, which are expanding in
Brazil and Latin America with a low level
of indebtedness, a growing cash flow capacity,
a focus on the continuous improvement
of our sales model, as well as the possibilities
generated by the direct selling system, allow
us to see in the turbulence more
opportunities than threats. Without, obviously,
failing to give the necessary attention and
adopt the necessary measures to respond
to a potentially more recessive climate.
Most importantly, we know we can work
through these world events and moment
in our own corporate history vigorously
pursuing the broadest expression of our
company's identity, of our ideals and dreams.
May we be guided by the strength of our
unity and by the conviction that, beginning
with the microcosm represented by the
individual person, we can change the world.
It is in the heart and in the eye of each one
of us that change is built.
We could not end this message without
expressing our deep gratitude to all of
you who have joined us in our efforts to
continually build our company - employees,
shareholders, consultants, suppliers, customers
and everyone whose presence in the world
contributes to making it a better place.
May this moment herald the beginning
of a more hopeful future for all.
Profile
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
06 07
Celebrating 40 years of existence in September 2009,
Natura is a cosmetics, fragrances, and personal hygiene
company recognized for maintaining a direct sales business
model that seeks to create sustainable value by establishing
quality relationships with society. Besides Brazil, Natura also
operates in France and another seven countries in Latin
America: Argentina, Chile, Colombia, Peru, Venezuela, and
Mexico, and in Bolivia, where it operates via a local distributor.
Our head office, in Cajamar (state of São Paulo), houses
an integrated research, production, and logistics center.
We also have a plant and a laboratory to develop oils from
native trees in Benevides (Pará), and distribution centers
in Itapecerica da Serra (São Paulo), Matias Barbosa (Minas
Gerais), Jaboatão dos Guararapes (Pernambuco) and Canoas
(Rio Grande do Sul), the latter inaugurated in 2008. Since
2006 our Advanced Technology Center in Paris, France, has
supported our constant search for innovation.
We have a total of 5,598 direct employees in all of our
operations. Because in 1974 we chose to distribute our
products through direct sales, we also have around 850,000
sales representatives (consultoras or consultants) for whom
we create employment and income opportunities.
Since 2004, our shares have been listed on the New Market
of the São Paulo Stock Exchange (BM&FBovespa). Our
corporate behavior assures that we always seek to appreciate
and respect the interests, values, and rights of all our
stakeholders. We want to learn from and share with our
chain of relationships and through that learning to balance
our economic, social and, environmental performances. We
also feature, for the third consecutive year, on the Corporate
Sustainability Index (ISE) of the São Paulo Stock Exchange.
Our products promote the Well-being/Being Well, the reason
for being of our brand. Through these products, we wish to
awaken senses and to grow our awareness of the relationships
we establish, enhancing people’s connections with themselves,
with others, and with the world. Based on this vision, we want
to combat stereotypes of beauty and appreciate individuality,
while at the same time awakening an awareness of the fact
that we are part of an immense chain of life.
Mexico
Commercial Operation
Natura Polanco
and Florida Houses,
in Mexico City, and
Monterrey House
Venezuela
Commercial Operation
Colombia
Commercial Operation
Natura Bogotá House
Cali and Medellín
Peru
Commercial Operation
Natura Lima Norte House
Chile
Commercial Operation
Natura Santiago House
Argentina
Commercial Operation
Buenos Aires Natura House
Natura’s
Operations
France
Commercial Operation
Natura Paris Maison
Research and
Technology Laboratory
Brazil
Benevides (state of Pará)
Plant / Research and Technology
Laboratory
Cajamar (state of São Paulo)
Research, Manufacture and
Logistics Center and Natura’s
head office
Canoas (state of Rio Grande do
Sul) Distribution Center
Campinas (state of São Paulo)
Natura House
Itapecerica da Serra (state of
São Paulo) Distribution Center
Jaboatão dos Guararapes
(state of Pernambuco)
Distribution Center
Matias Barbosa (state of
Minas Gerais) Distribution
Center
l
a
r
u
t
a
n
a
u
n
a
o
i
r
ó
t
a
e
r
l
High-Priority
Sustainability Topics
We are convinced that a major change in
the current development model is necessary.
We believe that the economic crisis may reveal
great opportunities related to sustainability,
encouraging the creation of a new society
committed to the prudent use of natural
resources, increased social justice, and inclusion.
We understand our role in this change: to consistently
contribute to the transformation of society towards sustainable
development, creating a business model that brings together
economic growth and social and environmental progress.
Innovation is one of the main pillars of our operations.
Through it, way of innovation, we seek to turn social and
environmental challenges into opportunities, such as in the
sustainable use of biodiversity, which is the basis of our
technological platform.
Our goal is to assure successful, long-term business, with
conscientious leaders who are genuinely interested in
environmental issues and economic and social development.
To achieve this goal, we need strategies, innovative initiatives,
and solid processes that allow us to monitor our performance.
The focus of our operations for the coming years will
be as follows:
The Amazon - Although it is not a topic addressed by our
stakeholders, Natura sees the Amazon as a key factor in the
development of Brazil. Given what the Amazon means for
future generations, we want to help create a development
model for the region, working with government, communities,
NGOs, academia and other players of civil society.
Biodiversity - The extinction of species is a major threat to
the web of life on our planet. By sustainably using ingredients
from nature and biodiversity and appreciating traditional
regional and local cultures, we are contributing to the
balanced use of natural resources. We seek to encourage
production based on sound agroforestry models, creation
of community development funds and fair price value chains,
and remuneration for traditional knowledge.
Education - Education is the main transforming element
of society. We seek to use our communication channels
to convey our values and share them with our stakeholders.
With this in mind, we began to disclose environmental
information on the packaging of our products and assumed
the commitment to contribute to the improvement of
the quality of education in Brazilian public schools.
Greenhouse Gas (GHG) Emissions - The climate crisis is
a global challenge as important as the recent economic crisis,
and all organizations should help combat the greenhouse
effect. In 2007, we launched the Carbon Neutral Project,
which coordinates our previously isolated actions to reduce
carbon emissions. We also set the ambitious target of
reducing by 33% our GHG emissions in all of our chain
by 2011. This program also includes carbon offseting.
Impact of products - We are a retailing company selling
by direct sales; so the impacts of our operations can be
clearly defined: from the environmental standpoint, our
most relevant negative effects are in production chain and
in the final disposal of our products and packaging. Our
social effects are more far-reaching due to the 850,000
consultants who sell our products. Throughout this chain,
we seek to create ever more shared economic value.
The quality and safety of our products is a commitment
of those whose reason for being is Well-being Well. Before
they get to our nearly 42 million consumers, all new
ingredients and formulas are analyzed by health and safety
specialists and subject to tests monitored by dermatologists
or, in some cases, by multidisciplinary teams. This is a basic
condition for our operations in the cosmetics, fragrances,
and personal hygiene markets.
Quality of relationships - Sustainable results are achieved
by means of quality relationships and, for this reason, we seek
to maintain open communication channels with all our
stakeholders in an ongoing exercise in transparency. We
foster ethical and honest relationships with our consumers,
employees, consultants, suppliers and many others who help
us build our brand. In 2008, we included relationship quality
management in our strategic planning and developed
structured education processes for the relationship with
and engagement of stakeholders.
Natura Value Chain
Stage 2
Stage 1
Stage 4
Stage 3
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
10 11
Natura’s main performance indicators in 2008 related
to the stages of our value chain are:
Stage 1: Extraction and transportation of raw materials
and packaging (direct and indirect suppliers)
R$2,567.3 million: Distribution of wealth to suppliers
74%: Satisfaction of suppliers
26: Number of certified ingredients
72,095 mt: Greenhouse Gas (GHG) Emissions related
to the extraction and transportation of raw materials
and packaging
17,216 mt: GHG emissions related to direct suppliers
(process and transportation to Natura)
Stage 2: Industrial and internal processes
R$ 571.9 million: Distribution of wealth to employees
R$ 1,032.2 million: Distribution of wealth to the
government
R$ 1 03.0 million: Investments in innovation
0.38 L/unit: Consumption of water per unit billed
424.1 kjoules/unit: Consumption of energy per
unit billed
22.4 g/unit: Total weight of waste per unit billed
31,554 mt: GHG emissions related to internal processes
Stage 3: Sale of products (transportation and distribution)
R$ 2,023.8 million: Distribution of wealth to consultants
849.600: Number of consultants (Brazil and other
operations)
88%: Satisfaction of consultants
118: Number of products launched in 2008
30,946 mt: GHG emissions related to transportation
of products to consultants and consumers
Stage 4: Use of products and disposal of packaging
19.86%: Refill rate on items billed
71.3 mPt/kg: Environmental impact of packaging per
number of products1
36,689 mt: GHG emissions related to the final disposal
of products and packaging
1. The indicator also includes effects on the extraction and transformation
of packaging.
Cross-sectional indicators
R$ 499.7 million: Distribution of wealth to shareholders
R$ 542.2 million: : Net income
R$ 3,618.0 million: Net revenues
R$ 859,9 million: EBITDA
23.8%: EBITDA margin
R$ 54,738,000: Investments in corporate responsibility
Development of
Our Commitments
Over the years, Natura has consolidated the
practice of establishing clear commitments
to the evolution of its performance indicators.
With the constant enhancement of our
management model, these targets have come
to reflect priority sustainability topics and play
key roles in our strategic planning process.
In 2009, as a result of the corporate
restructuring we carried out and the
uncertainties generated by the global
economic crisis, we delayed the completion
of our planning process, which affected the
setting of new targets. Therefore, we intend
to publish our commitments for 2009 by
May 2009 in the online version of our report
at www.natura.net/relatorio.
For further information on the targets
presented in this table, please refer to
the chapter of the related stakeholder.
Stakeholders Commitments for 2008
Achievement of targets
Consultants
(cid:129) Extend the Ombudman services to consultants.
PARTIAL In 2008, with the implementation of the Ombudman pilot project for a group of approximately 10,000
consultants, we detected the need to change some internal processes before opening to the whole of Brazil
so as to ensure that all contacts that reach this communication channel refer only to issues related
to the work of the Ombudsman´s Office.
(cid:129) Maintain at 90% the quality of the relationship
with consultants.
ACHIEVED We maintained the relationship quality at 90%.
Consumers
(cid:129) We will publish the Principles of Relationship
with consumers.
Suppliers
(cid:129) Obtain 85% of favorable response from supplying
companies in the supplier satisfaction survey.
Surrounding
Communities
(cid:129) Adopt an indicator to evaluate our impacts
on the development of surrounding communities.
NOT ACHIEVED We did not want to publish the Relationship Principles without the approval of the stakeholder
involved. The approval process with consumers is underway but we were unable to complete it in 2008.
NOT ACHIEVED The favorable response rate was 74%. We increased the total sample of the survey from 152 (2007)
to 487 (2008), and the new mix of suppliers revealed new improvement opportunities, particularly among suppliers
of services, ingredients, and indirect materials – groups that are more representative of our supply chain.
NOT ACHIEVED Based on a deeper analysis of the topic, we underswtood how difficult it is to create an indicator
that can also be comparable outside the company and cover the different dimensions: economic, political, human,
and social. This work is still in progress.
Government
(cid:129) Publish a policy on lobbying and our Relationship
Principles with the Government.
ACHIEVED We published our Relationship Principles with the Government and our Stand on the Practice of Political
Lobbying, which is in favor of regulating political lobbying in Brazil so that its practice can have clear and transparent rules.
Environment
(cid:129) Reduce by 33% GHG emissions in the whole
production chain between 2007 and 2011.
PARTIAL We achieved the target proposed for 2008 and will continue to pursue the 33% reduction in CO2 emissions
per kilo of product billed by 2011.
(cid:129) Include four new ingredients in phase III of the
certification process.
(cid:129) Increase to 79% the material in our products
that comes renewable plant sources.
(cid:129) Use 100% organic alcohol in our products.
ACHIEVED We certified four new ingredients.
NOT ACHIEVED The percentage of renewable plant material used in Natura’s products dropped slightly in 2008
to 77.5%. This was due to the increase in the sales of products that use a smaller quantity of this type of material
in their composition.
NOT ACHIEVED 72.6% of the alcohol used in our products is organic. We were not able to make all the changes necessary
in our products to change the whole portfolio to organic alcohol. This will remain our focus in 2009.
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
12 13
(cid:129) Reduce the average environmental impact of
packaging (Life Cycle Assessment - LCA) to 72 mPt/kg.
ACHIEVED We reduced it to 71.3 mPt/kg.
(cid:129) Increase to 13% the total of post-consumption
recycled packaging material.
(cid:129) Reach a minimum 18.5% refill rate on items
billed in Brazil.
(cid:129) Consume a maximum of 148,700 m³ of water
at the units in Cajamar and Itapecerica da Serra.
ACHIEVED We increased it to 13%.
ACHIEVED We reached 19.86% in Brazil.
ACHIEVED We consumed 124,236 m³.
(cid:129) Consume a maximum of 151.4 X 1012 joules of
energy at the units in Cajamar and Itapecerica da Serra.
ACHIEVED We consumed 126.38 x 10¹² joules.
(cid:129) Recycle a minimum of 89.0% of the waste generated
at the units in Cajamar and Itapecerica da Serra.
NOT ACHIEVED We recycled 88.7% in Cajamar and Itapecerica da Serra. We need to improve our internal processes
for separating materials and training employees.
ACHIEVED PARTIAL
NOT ACHIEVED
About this
Report
This is our ninth sustainability report prepared based
on Global Reporting Initiative (GRI) guidelines. For
the second consecutive year, we achieved the A+
application level, with external verification conducted
by Det Norske Veritas (DNV) and data checked
by GRI itself. We also comply with the rules of
the Brazilian Securities Commission, the Brazilian
Association of Publicly-Traded Companies, and with
the transparent communication principles of the
Brazilian Association of Corporate Communication.
This report covers all operations of Natura in Brazil
and abroad carried out in 2008.
In order to create shared value, we understand that
we must align our strategies with the vision of our
stakeholders. For this reason, the identification
of priority sustainability topics is the result of a
process of stakeholder engagement that began on
a structured basis in Brazil in 2008. This process makes
possible to prepare the materiality matrix that guides
the focus of the social and environmental actions of
the different areas of the company and makes the
sustainability guidelines outlined in Natura’s strategic
planning more specific. It also guides the organization
of the content of this report and the definition
of targets we commit to in 2009.
To learn more, please refer to the chapter
About the Report on page 88
Main Events
in 2008
Economic
(cid:129) Growth of 17.7% in consolidated net revenues,
with positive results in Brazil and Latin America.
(cid:129) Increase of 22.5% in EBITDA, with additional
investments of R$88.0 million in marketing funded
by productivity gains.
(cid:129) Appreciation of 18% in Natura’s shares, in comparison
with a drop of 41% by the Ibovespa, the main index
of the São Paulo Stock Exchange.
(cid:129) Increase in the creation and distribution of wealth
to all stakeholders.
(cid:129) Innovation rate, which dropped to 56.8% in 2007,
jumped to 67.5%.
Social
(cid:129) Increase of 50% in the volume of sales of the
Believing is Seeing (Crer Para Ver) program and
its implementation in Argentina.
(cid:129) Growth of 18.2% in the number of consultants
to 850,000 in Brazil and abroad.
(cid:129) Increase in the employee turnover rate in Brazil
from 9% in 2007 to 12.37%.
(cid:129) The new structure caused a reduction of 8.59%
in the number of employees in Brazil, mainly
concentrated in the administrative area.
Environmental
(cid:129) The Carbon Neutral Project eliminates 9.0% of
Natura’s relative emissions in two years, which shows
the proportion of Natura’s challenge to reduce GHG
emmisions by 33% over five years.
(cid:129) Launch of the line for children Naturé, which leads
children, in a playful way, to experience their first
notions of the conscious use of water.
(cid:129) Reduction of the consumption of water (8.91%)
and energy (16.88%) in industrial operations per
unit billed.
Strategy
and Management
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
14 15
We produced another year of strong earnings in 2008, this
time driven by the action plan to restore growth in Brazil,
our largest market. Through this plan, whose initiatives will
continue until 2010, we are moving forward with our strategy
to expand our business, in a sustainable way, in Brazil and
Latin America, using the direct sales model.
We believe that the pursuit of international expansion with
a global brand is still important for the future of our business.
However, even before the global economic crisis had fully
taken hold, we had already decided to indefinitely postpone
our entry into the United States market. Instead, we are
focusing our efforts on operations in countries where we
already have a presence, by demonstrating that our brand,
products, values, and sales model are well accepted and that
there is still plenty of room for growth.
We have good reasons to believe that we are on the right
track. The Brazilian cosmetics, fragrances and personal hygiene
industry experienced another year of growth in 2008,
expanding 16.3% in the target market or 9.3% in real terms
up until October, according to partial data from the Brazilian
Personal Hygiene Industry Association. The direct sales
segment also continued its pace of growth in Brazil, with
a turnover of R$18.5 billion in 2008, up 14.1% from the
previous year, and employing some 2 million active resellers,
an increase of 7.2% in the sales force, according to data from
the Brazilian Association of Direct Selling Companies.
However, as we headed into the second half of 2008,
we found ourselves confronted by fallout from the global
economic crisis that will, in one way or another, affect all
the various sectors of the Brazilian economy. Nevertheless,
we have a solid economic grounding, which lowers our risks:
(cid:129) there is a consensus, among analysts, that Brazil will
be less affected by the crisis;
(cid:129) we are the market leader with a widely admired
brand and broad consumer preference; in 2008,
we advanced from 42% to 47% in a preference survey
of consumers, while the second-place brand fell from
18% to 16%;
(cid:129) we have low indebtedness and a growing cash
generation capacity, enabling us to continue our
business expansion;
(cid:129) our business model, based on direct sales, does
not depend on credit;
(cid:129) we operate on the personal hygiene, perfumes
and cosmetics market, which has historically proved
highly resilient to economic downturns.
We are well prepared for this economic climate. The plan
we put into practice in 2008 was, on the one hand, to
improve and increase investments in marketing to speed
up our sales growth, funded by productivity gains, and, on
the other hand, to reinforce our culture of and commitment
to sustainability and to improve our organizational model.
See below the progress we have made.
1 - Innovating the sales model – In order to streamline
the relationship with our consultants, we expanded
the Natura Consultant Adviser (NCA) model in Brazil.
This measure has produced the expected results: it has
supported the growth of the sales force and increased
sales. The model has also improved customer service,
due to an increase in both the amount of trainings and the
number of consultants. .
In 2008, the new model was implemented in 65% of the
sales force in Brazil and 5,844 NCAs were trained. By May
2009, we should have covered the entire sales force. The
effects were felt more strongly in the second half of the year,
when the growth in the sales force in Brazil increased, up
15.5% from the previous year, compared to a growth of
9.2% in the first half of the year in relation to the same
period in 2007 (see graph).
Cycle-by-Cycle Growth in Available Consultants
2008
2007
NCA Implementation
MG
ES
RJ
NE
SP1
730.000
710.000
690.000
670.000
650.000
630.000
610.000
590.000
570.000
550.000
Cycles
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
2 - Focus on product innovation – In 2008, we opted for
the Menos é Mais (Less is More) strategy for our product
portfolio. We began a process to reduce the number of
items from 930 to 739, concentrating our efforts on those
with greater popularity. This helps us minimize costs and focus
more on management, which will maximize the results
of communication with and training of consultants, and
in turn benefit our end consumers.
We focused on four launches – the Naturé, Tododia and
Amor América product lines and the Chronos Soy Polytensor
anti-wrinkle cream, whose sales exceeded our expectations.
We applied the same strategy we use for developing new
products, so as to concentrate efforts on projects that can
have a significant commercial impact. We also kept investments
in innovation unchanged, and the scale of our creative capacity
can be seen in the sharp recovery of our innovation rate,
which had dropped to 56.8% in 2007 but climbed back up
to 67.5% in 2008.
I
Number of products launched
225
183
118
2006
2007
2008
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
16 17
Investments in innovation (R$ million)
% of net revenues
3.4%
3.2%
88
2006
108
2007
2.8%
103
2008
Natura employees check
Ekos line products
5 - Organizational culture – We are strengthening our
organizational culture and reasserting the company’s values
and beliefs, since we believe that in them reside the
uniqueness of our organization and the driving force
of our business. Thus developing engaged leaders and
a management model in line with our essence are key
factors for our growth.
6 - Quality of relationships – To ensure the utmost
transparency in our governance systems and to allow
our key stakeholders to actively engage the management,
we have developed a systematic process of stakeholder
engagement. We believe the time is right to start preparing
for a new cycle of growth and, accordingly, it is essential
to listen to and understand the needs of all stakeholders
and to turn their contributions into opportunities
to improve our business.
The direction we took in 2008 has proved to be the right
one, and we are going to continue on the same track.
We are focusing on the successful execution of the plan
to restore growth and on the development of the
management model. We are, therefore, preparing for a
new cycle of expansion as an increasingly more innovative
and productive company that has adjusted to the challenges
of our times. We anticipate tremendous opportunities for
companies like ours that have an inclusive value proposition
(built in collaboration with stakeholders) and are highly suited
to the climate of change in the global economy.
Innovation Rate1
58.3%
56.8%
67.5%
2006
2007
2008
1. Gross Revenues for the past 12 months from products launched over the past 24 months
divided by Gross Revenues of Natura for the past 12 months. It shows the representativeness
of the past year’s sales of products launched over the past two years.
3 - Investments in marketing – In order to support all
the initiatives mentioned here and to improve the exposure
of our brand, we increased our investments in marketing
by R$88.0 million in 2008, funded by productivity gains, which
totaled R$94 million over the year. This saving was the result
of more efficiently managing the processes of preventing
product losses, lower costs of manufacturing and inputs,
a reduction in the costs of sales catalogues, and an increase
in Internet orders placed by our consultants.
These investments make us more commercially vigorous
and reduce the emphasis on promotions and discounts
in our marketing strategy.
We have made better use of the Internet, increasing orders
placed over the web. This is due to incentive campaigns
such as the Connectivity Project. Internet-based orders
represented, on average, 40.9% of monthly orders in 2008,
peaking at 52.4% in December.
4 - Management based on processes – The changes in the
structure of Natura were intended to make the company
more agile, with fewer levels of corporate hierarchy, putting
us closer to consultants and consumers. Throughout 2008,
we implemented an organization model based on the
management of processes catering to business units
and regional units.
This new configuration decentralizes decision-making
and the execution of key processes. The business units
are responsible for product development and for the
management and results of brands and categories; they
interact with the regional units, which in turn are responsible
for the relationship with consultants, sales management,
and local results. This joint action is improving the business
of Natura by region and by brand and category.
As a result, there has been a change in the composition
of the Executive Committee and the leadership team,
which will be responsible for implementing the main
processes of Natura.
Corporate
Governance
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
18 19
Corporate governance at Natura has evolved dramatically in
recent years, especially since the company went public in 2004
and listed its shares on the New Market of the São Paulo Stock
Exchange (BM&FBovespa). The Board of Directors, the highest
administrative authority at Natura, consists of three founding
partners and four external, independent members, none
of whom occupy any internal executive position. The board
members were chosen according to their qualifications,
knowledge of sustainability, the complementary nature of their
executive experience, and lack of conflicts of interest.
In 2008, the Board of Directors met eight times to address
strategic issues, the implementation of the action plan, and
the company’s integrated economic, social and environmental
performance. The work of the Board is evaluated regularly
every year, and the remuneration of its members consists
of a part that is fixed and paid monthly and another part
that is variable, linked to economic, social, and environmental
goals, and paid annually.
There are currently four auxiliary committees (Strategic;
Corporate Governance; People and Organizational
Development; and Audit, Risk Management, and Financial)
that support the Board of Directors in its evaluation
of strategic issues affecting the company’s business:
Board of Directors
Antonio Luiz da Cunha Seabra
Co-c hairman
Guilherme Peirão Leal
Co-chairman
Pedro Luiz Barreiros Passos
Co-chairman
Edson Vaz Musa
Chairman of the People and Organizational
Development Committee
José Guimarães Monforte
Chairman of the Audit, Risk Management
and Financial Committee
Julio Moura Neto
Chairman of the Strategy Committee
Luiz Ernesto Gemignani
Natura Executive Committee
Alessandro Carlucci
CEO
José Vicente Marino
Senior Vice President of Sales and Marketing
Marcelo Cardoso
Senior Vice President of Organizational
Development and Sustainability
Roberto Pedote
Senior Vice President of Finance
and Legal Affairs
Paulo Lalli
Senior Vice President of Supply Chain
Maurício Bellora
Senior Vice President of International
Operations
Pedro Villares
Latin America Operation Director
Strategic Committee
Three members and the CEO analyze, on a monthly basis,
the strategic issues, preparing guidelines and recommendations
for the Board.
Corporate Governance Committee
Discusses the improvements in governance and the
business operation. It also evaluates the committees
and the Board. It is formed by four members, who meet
on a quarterly basis.
People and Organizational Development Committee
Consists of three members, the CEO, and the Senior Vice
President of Organizational Development and Sustainability.
In monthly meetings, it addresses matters of remuneration,
leadership, succession, training, and topics of interest to
human resources.
Audit, Risk Management and Financial Committee
Formed by four members, three associated with Natura
(a board member, the Senior Vice President of Finance
and Legal Affairs and the Manager of Risk Management
and Auditing) and an external representative. It meets
each month to support the Board in its analysis of financial
matters, risks, and the relationship with external auditors.
Natura has an Executive Committee (Comex) and three
regional committees – Brazil, Latin America and
International – that report to the Board and are forums
for executive discussion, each with a different geographical
focus. Comex has three support committees that analyze
all the initiatives related to brand management, sustainability,
and products.
Sustainability runs through our entire governance model.
The Sustainability Committee is an important preparatory
discussion forum before decisions are made by Comex,
and the issues are also regularly analyzed by the Board.
It is overseen by the Sustainability Board, which monitors
the execution of the action plans that are run by the
various corporate departments.
In 2008, there was a change in the composition of Comex,
which took on a representative involved in the company’s
sustainability process.
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
20 21
Compensation of Key
Management Personnel
As a topic of greater visibility in 2008, the compensation
policy for key management personnel, together with how
this information is disclosed, was analyzed by the Natura
executive group. We are seeking a clear, balanced, and
transparent position on this topic that is legally grounded
and serves the interests of shareholders, investors, and the
professionals themselves.
Natura managers have a variable compensation model that
takes into account the results of both the company and the
individual. The results of the company take into consideration
the following items: financial performance (EBITDA); the
financial result of foreign operations; the organizational climate
survey; the consultant satisfaction survey; the consumption
of water, and carbon emissions.
In 2009, a new executive compensation model was launched.
The objective was for payment to reflect the main concepts
of our recent organizational changes. The compensation
model proposes a gradual shift in emphasis from a fixed
salary to a variable salary. The change is intended to
encourage a sense of ownership and engagement,
strengthening the relationship between remuneration and
building value in the company. The new model was designed
to increase the effectiveness of using remuneration to attract
and retain leaders committed to the long-term plans of
the company.
The main change, however, is in the format of the stock
option plan. Previously distributed in proportion to salaries,
it is now related to the short-term performance of the
executives and to their decision to use a part of their
own variable income to purchase Natura stocks.
To learn more, please read the Compensation
item in the Employees chapter on page 27 and
Note 18 to the Financial Statements.
Risk Management
Risk management is formally covered in Natura’s
governance structure. All the analysis of accounting, fiscal,
tax, corporate, and new investment issues is conducted
by the Audit, Risk Management, and Financial Committee,
in support of the Board.
There are two main types of risk: strategic risks, for which
we interpret scenarios that could affect the company;
and operational risks, related to the internal processes
that managers must evaluate with their teams. By creating
scenarios of strategic and operational risks in each of
Natura’s macro-processes and production chain processes,
all the existing weaknesses are taken into account, always
considering the three pillars of sustainability: social,
environmental, and economic.
However, there is still no structured analysis of the immediate
effects of climate change on our business, something we shall
start to consider in our long-term planning. In 2008, Risk
Management explored a greater number of strategic risk
scenarios. We have incorporated into the order cycle (the
time between the consultant placing an order and the
product’s reaching the final consumer) a risk self-evaluation
tool, as we plan to do eventually in all the processes.
Also in 2008, a Risk Management Policy document was
created and distributed to all managers, establishing a set
of principles, actions, roles, and responsibilities to identify,
evaluate, and manage the risks to which Natura may be
exposed. We want to provide guidance for managers, who
are responsible for decision making, when taking a position
concerning the identified risk.
Internal Audit
The internal audits at Natura are conducted by an
independent group of employees to guarantee the full
impartiality of their work. This is why the group reports
only to the Audit, Risk Management, and Financial Committee.
When they are conducted, Natura internal audits observe
a set of procedures and tests to evaluate the internal controls,
and they also look into possibilities of fraud. The major focus
in 2008 was on special audits, in response to requests from
the Natura Ombudsman´s Office and the Audit Committee.
In 2008, we audited 24 cases in Brazil and at our international
units, at the request of the Ombudsman´s Office, which was
contacted by Brazilian and international employees, suppliers,
and some of the consultants. Of these 24 audits, six proved
to be cases of misconduct, resulting in the dismissal of those
involved and in improved control mechanisms.
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
22 23
Social
Performance
Quality of Relationships
Natura remains faithful to its commitment to establish,
maintain, and value relationships grounded in ethics,
transparency, and open and ongoing dialogue with all our
stakeholders, from employees, consultants, suppliers,
shareholders, and surrounding communities to the final
consumers. Whether in Brazil or in our foreign operations,
we want to forge closer ties, and to achieve this we are
always working to improve the quality of the relationships
we build.
In 2008, we continued the process of managing the quality
of relationships, launching a systematic process of stakeholder
engagement that consists of pushing back the frontier of the
organization through dialogue and collaboration with all our
many stakeholders. This is how we will develop valuable
solutions both for Natura and for all parties that have some
form of relationship with us and our brand, and thus are
a part of our community.
We developed initiatives to engage in dialogue with five
stakeholder groups most closely involved with our business:
employees, consultants, customers, shareholders, and suppliers.
These virtual collaborative dialogues identified problems and
opportunities in the relationship. We also staged a face-to-face
workshop with representatives from the five stakeholder
groups to discover topics of interest to the Natura
Community. The results of this workshop will enrich our
strategic planning, in addition to already having helped set
the priorities for the topics contained in this report.
To forge closer ties with all our stakeholders and to lend
more legitimacy to these relationships, we created in 2008
the Executive Committee for Managing the Quality of
Relationships, which will be expanded in 2009 with the
participation of external members. The primary focus of the
committee’s work, in the first year, was to come up with a set
of relationship guidelines with the various stakeholders. The
committee has also decided that the process of developing
and updating the Relationship Principles, as well as the
disclosure of their contents, will now be the responsibility
of the stakeholder managers, and also be a part of the
process of managing the quality of relationships.
Ombudsman´s Office
Set up in 2006, the Ombudsman´s Office is one of the
dialogue channels that support the evolving relationship
with our stakeholders. Linked to the Office of the Senior Vice
President of Organizational Development and Sustainability,
it is responsible for mediating solutions for matters that run
counter to the Natura Relationship Principles, and also for
identifying opportunities to improve our processes, policies,
and relationships.
The procedure for contacting the office is simple: once the
comment is received, it is forwarded to the manager
responsible and then used to help improve the process. Each
year, we try to expand the scope of the service. In addition
to the employees in Brazil and Latin America and suppliers,
we have developed a pilot project, launched in early 2008,
to extend the service to some 10,000 consultants.
In 2008, the number of contacts received by the office grew
by 27.5% compared to the previous year (see graph below).
The issues the contacts addressed were related to technical
matters (policies, processes and infrastructure) and conduct:
70% of the contacts received related to criticisms and the
other 30% were consultations or suggestions. Allegations
of ethical misconduct are forwarded to and analyzed by the
Ethics Committee, on which the CEO serves. Whenever
it is considered necessary, the involvement of the Internal
Audit department is requested, as mentioned on page 22.
Total Number of Contacts Received by the Ombudsman´s
Office (by stakeholder)
Internal stakeholders - Brazil
Internal stakeholders - Lat. Am.
Suppliers - Brazil
Consultants - Brazil
Total
2006
1001
n/a
n/a
n/a
100
2007
649
292
123
n/a
690
2008
783
26
19
524
880
1. Data from October to December 2006 (launch of the Ombudsman Service: October
2006).
2. Data from October to December 2007 (launch of the Ombudsman Service: October
2007).
3. Data from May to December 2007 (launch of the Ombudsman Service: May 2007).
4. Data from January to December 2008 (launch of the Ombudsman Pilot Program:
January 2008). We handled another 687 critical matters received from consultants from
across Brazil through CAN – the Natura Service Center.
Internal Stakeholders in Brazil and Latin America
The Ombudsman´s Office serves as another dialogue channel
with employees. In 2008, the office received 809 contacts
from employees in Brazil and Latin America, from all levels of
corporate hierarchy and different departments. Of the 783
contacts received from employees and in-house outsourced
workers in Brazil, most (47%) were addressed to the Human
Resources Board and dealt with technical matters related
to people management, such as benefits, quality of life,
employment contracts, and training. For the Latin American
operations, meanwhile, 96% of the contacts dealt with
matters of conduct related to people management.
Each person who contacts with the Ombudsman´s Office is
asked to fill out a survey to determine his or her satisfaction
with this dialogue channel. In 2007, the survey revealed a
satisfaction rate of 97% among the internal stakeholders in
Brazil. In 2008, the rate was 96%, which we consider positive
and statistically the same as the previous year. We have
not reported the results of the survey for the internal
stakeholders in Latin America because there is not a
statistically significant sample.
Satisfaction with Ombudsman Channel
Internal stakeholders - Brazil
NA
97%1
96%2
2006
2007
2008
The percentages refer to positive responses to the question “are you satisfied
with this dialogue channel?”.
1.Respondants represented 62% of all contacts.
2.Respondants represented 59% of all contacts.
.
Consultants - Brazil
At the end of 2007, a pilot project was launched for a
group of nearly 10,000 consultants in the city of São Paulo.
Throughout 2008, the Ombudsman´s Office received and
processed 52 contacts, the majority related to Sales
Promoters. Also in 2008, as support for the service and
as experience ahead of expanding the channel to this public,
the Ombudsman´s Office handled another 687 critical matters
submitted by consultants from across Brazil through the
Natura Service Center (CAN). All the contacts followed the
same course as the other contacts. We have not reported
the results of the satisfaction survey for the pilot program with
consultants since we have yet to obtain a significant sample.
Suppliers - Brazil
The Ombudsman´s Office has also, since May 2007, been
supporting the evolving relationship with Natura suppliers
in Brazil. In 2008, we received 19 contacts, namely criticisms
and charges, addressing primarily technical matters regarding
the process of identifying and selecting suppliers, and contract
management, which includes the stages of negotiation
and payment.
To learn more about the practices of the
Natura Ombudsman´s Office, please visit
www.natura.net/relatorio
Employees
Number of Natura Employees
The 2008 shift in our organizational structure directly
affected our employees in Brazil. The new Natura
Management System began to be implemented based on
three pillars: processes, culture, and leadership. This had a
sizable impact on our employees, initially causing some
discomfort. The first signs of improvement, however, can
already be noticed, as the climate is recovering in the
administrative department, the area that was most severely
affected by the restructuring. The main purpose of the
changes was to make the company less cumbersome and
more agile and efficient in decision-making, with fewer levels
of corporate hierarchy and greater proximity to consumers
and the market. We mobilized and engaged the organization
as a whole to galvanize this process.
We have been working on this adjustment since early 2008,
and it has prompted an 8.6% reduction in the number
of employees in Brazil – from 4,798 in 2007 to 4,386 in
2008 – without affecting production or sales. The corporate
structure of Natura in Brazil, previously centered on
departments, is now based on a model of business units and
regional units, which promotes a more independent, direct,
and decentralized approach.
Our employees are key to corporate progress. Each one
contributes in his or her own way to our growth. Moreover,
they also play an important role as change agents in society,
whether by developing initiatives that involve our value chain
or by working as volunteers on projects that are in tune with
our Values and Beliefs. Consequently, it was essential for us
to take proper care of the professionals that were laid off.
We created a special severance package, including a cash
payment, an extension of medical insurance, and help finding
a new job. We also set up a Career Center with Internet
access and administrative support, staffed by specialized
consultants, to help people network and find employment.
This program is expected to last six months and, since its
launch in January 2009, some 25% of participants are already
in new positions.
This round of layoffs was accompanied by a wave of hirings,
the result of the process to regionalize Natura’s business,
which created job openings not only in São Paulo but also
in other states and regions of Brazil. To fill these positions,
we first gave the laid-off employees the opportunity to
relocate. In Latin America, the operations where the most
jobs opened were in Peru, Colombia and Chile, since they
had experienced an increase in sales.
Luiz Carlos Eduardo Junior, 23,
and Glaucia Aparecida Barichello, 23,
Natura Employees
Brazil
Argentina
Chile
Mexico
Peru
Venezuela
Colombia
France
Total
Other Employment Contracts
Interns
Temporary Workers
In-House Outsourced Workers
2006
4,361
262
122
141
179
35
n/a
30
5,130
2006
60
321
1,797
2007
4,798
276
179
259
229
63
79
36
5,919
2007
73
151
1,170
2008
4,386
306
222
277
290
50
135
32
5,698
2008
66
445
1,787
Some of the disruption caused by the restructuring process
is reflected in the employee turnover rate. In Brazil, the
turnover rate reached 12.4%, compared to 9% the year before,
with operations personnel most affected. The model of semi-
autonomous cells, which was set up in 2006, completed an
evaluation and maturity cycle in 2008. The semi-autonomous
cells eliminated a hierarchical level and created a structure
in which the employees report directly to the plant manager,
greatly improving autonomy. The professionals who could
not adapt to the new model and did not perform well ended
up leaving us.
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
26 27
Employee Turnover Rate (%)
Operation
2006
2007
2008
Brazil
Argentina
Chile
Mexico
Peru
France
Venezuela1
Colo mbia2
1. In 2006, the operation in Venezuela was structured for the start of operations and
the turnover rate was not measured.
2. The operation in Colombia began in 2007.
6.7
19.7
31.6
36.3
15.0
6.6
NA
n/a
9.0
16.1
20.4
56.5
17.2
4.0
43.5
4.6
12.4
16.6
13.9
42.7
12.2
35.0
31.9
35.4
Work Environment
Natura’s organizational climate score remained stable at 72%
in 2008. In the foreign operations, it grew in most countries,
particularly in Argentina, where it increased 11 percentage
points to 80%. In Brazil, the favorable response rate among
employees dropped back to 69%, influenced by the result
in the operating area, despite the positive results in the
administrative and sales areas. In 2009, we will work hard
to reverse this situation.
There is evidence of improvements in topics such as quality
of life and training (in this case, strongly driven by the sales
area), and although our challenge to improve the quality of
our relationship with employees is clear, the points needing
attention are in the action plan we are implementing. The
improvement opportunities are related precisely to topics
such as leadership, quality of the decision-making process,
and relationship, which are the core aspects of our new
organizational model.
Developments such as the new leadership team, the
implementation of management by processes at the business
and regional unit, strengthening relationships and the quality
of decision-making, and the strengthening of the organizational
culture will contribute to our continuous development of the
favorable response rate with all stakeholders. We believe that
this is not about raising a few percentage points, but about
changing our employees’ perceptions.
Favorable Climate Survey (%)
Total
Brazil
Argentina
Peru
Chile
Mexico
France
Colombia
Venezuela
2006
69
69
64
68
73
77
47
n/a
n/a
2007
72
71
69
80
72
83
56
86
52
2008
72
69
80
77
83
85
60
84
61
Efforts toward reaffirming our culture will play an important
role in the work environment, particularly when it also
becomes a process within the company, tied to the
engagement with and management of the quality of
relationships. The comprehensive diagnosis made with
employees in 2008 will result in actions aimed at the
different groups in 2009.
For us, diversity is a very important value, and the topic
merits even more attention when it comes to employees.
We do not have a final position on how we should
encourage diversity particularly in view of our ambition of
becoming a large global company open to the multicultural
influences of the regions and peoples that are part of our
community. Therefore, the data presented below follow the
market reference practices and do not reflect action focused
on the topic. However, in 2008 we had a consistent plan
for contracting disabled workers at Natura Cosméticos and
managed to increase their numbers on our staff by 50%.
Diversity1
2006
2007
2008
Proportion of Salary Compared with the Brazilian
Statutory Minimum Salary - Brazilian Operations
Total employees - Brazil
Disabled employees
Women
Black or multiracial women
Black or multiracial men
Above 45 years of age
1. We did not make the comparison by race in 2006, 2007, and 2008 because a
sampling analysis showed us the need for a review of this classification in our database
of employees. We will update the reference file with all employees in order to ensure
accuracy of the survey for next year.
4,793
5.2%
63.9%
NA
NA
9.1%
4,361
4.2%
63.7%
NA
NA
10.3%
4,386
5.4%
63.7%
NA
NA
10.5%
Compensation
We significantly reformulated our compensation practices in
2008 to promote employee advocacy of and commitment to
Natura’s goals. The policy, focused on variable compensation,
became more transparent and simple. In July, the operating
areas started to receive profit sharing semiannually, which
allows us to reduce the access to variable compensation
by those who perform activities with more predictable
results during the year.
2006
Salary Profile¹
Average Monthly Salary in Brazilian Operations (R$)
2007
3,642.71 3,815.50
3,311.61 3,291.17
NA
NA
NA
NA
6,378.74 6,729.55
3,255.46 3,317.39
Women - Total
Men - Total
Black and multiracial women
Non-black and non- multiracial women
Black and multiracial men
Non-black and non-multiracial men
Over 45 years of age
Up to 45 years of age
1. We did not make the comparison by race in 2008 because a sampling analysis showed
us the need for a review of this classification in our database of employees. We will update
the reference file with all employees in order to ensure the survey for next year.
For the purpose of the calculation of this indicator, the bonuses paid to sales managers
and promoters were considered. When the sales force employees are placed in their
categories, this improves the average women’s salaries due to the bonuses, excluding
production jobs.
The methodology for consolidating the data was improved, which generated a difference
with respect to previous years.
2008
4,351.99
3,550.31
NA
NA
NA
NA
7,540.24
3,653.35
NA
NA
NA
NA
In 2008, collective bargaining agreements provided employees
with an average salary increase of 9%. The female administrative
group received a higher salary increase than that the one set
in the collective bargaining agreement, which is explained by
the growth in sales bonuses obtained in 2008, which
increased 21% in relation to 2007.
In all of our operations, our salary levels are above the
minimum compensation levels in their respective markets.
In Brazil, the inclusion of salaries paid at the plant in Belém,
state of Pará, where market compensation is lower than in
São Paulo, caused a reduction in the proportion between
the lowest salary paid by Natura and the Brazilian statutory
minimum salary, changing the pattern from previous years.
1.90
2006
1.88
1.18
2007
2008
Professional Development
Training leaders is essential for our growth and is in line with
our Values and Beliefs. Therefore, we intend to enhance our
training initiatives in 2009 to include the new professionals
who joined Natura in the past few years. In 2008, the main
organizational development milestone was the progress in
the formation of the Brazil Executive Committee (Comex)
and Natura’s leadership team. The executives responsible
for resuming Natura’s growth pace in Brazil were chosen.
These 29 leaders were in charge of redesigning their own
structures and playing a leading role in the change movement.
Additionally, in 2008 we continued the Leader Training Program,
the main objectives of which are to support the development
of Young talents and qualify them to assume increasingly more
strategic positions within our company.
Overall there was a scheduled reduction in the training flow,
particularly in the second half of 2008 when Natura’s focus
was on the development of the organizational structure. The
group that had most access to training was the sales force,
particularly after the implementation of the Natura Consultant
Adviser Program.
Average Hours of Training per Annum per Employee, per
Functional Category in Brazilian Operations1
2006
164
82
61
38
111
Group
Production
Administrative
Managers
Directors
Total
Investment in Brazil
(in R$ thousands)²
1. This indicator includes the training of employees, sales promoters and the
Natura Education Program.
2. The Brazilian investment data includes the training of the Sales Force
(Managers and Promoters.
2007
120
92
90
55
105
15,951
16,286
2008
105
90
68
9
94
14,062
In the Latin American operations, in 2008, we had a total
of nearly 50 hours of training courses per employee, with
an emphasis on the administrative employees (70 hours).
The highlight was the training program of the sales force
in Argentina, where 80% of its employees attended more
than 30 hours of training courses.
To learn more about the professional
development, please visit
www.natura.net/relatorio
Health and Safety
Despite our prevention efforts, the number of work-related
accidents grew in 2008. This increase is due to the fact that we
have more new employees and an initial training process that
requires improvement.
To improve, we adapted and revised work safety management
processes, using OSHAS 18001 as a model. We prepared
specific standards and procedures to manage risk situations and
relaunched the Near-accident Program to encourage the
communication of risk events and situations to our employees.
The good news is that we reduced by 24% the number of
work-related accidents recorded with outsourced employees
and service providers, who often perform higher risk activities.
In 2009, in addition to continuing these initiatives, we intend to
pay more attention to behavioral analysis, by means of internal
audits and with the participation of managers; implement new
basic safety rules; provide greater synergy between the work
safety, training, operating, and medical service areas; and bring
the engineering, work safety and operating areas closer
together to prevent injuries and accidents in the development
and use of new machinery and processes.
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
28 29
To learn more about the safety indicators,
please visit www.natura.net/relatorio
Communication Channels
In order to be close to and maintain an open dialogue with
our employees, we have communication channels to
transparently inform them of all significant initiatives and facts.
A new development in 2008 was the launch in October
of the Natura Channel, a journalistic digital medium that
improved the daily communication of our activities. There
are 20 transmission points – 12 in Cajamar, four in Alphaville,
and four in Itapecerica da Serra.
The main characteristic of the Natura Channel is to encourage
the engagement of employees, who may suggest stories and do
some interviews. We also changed the publication frequency
of the Ser Natura Colaborador (To Be a Natura Employee)
internal newsletter from monthly to special issues, which will
be prepared whenever there is the need to publicize strategic
topics, such as the results of the Organizational Climate Survey.
To learn about the benefits offered by Natura,
please visit www.natura.net/relatorio
Consultants
The direct sales model makes our thousands of consultants
the leading players in the company’s growth. Using personal
contact, they are the ones who add value to our products
and ensure that consumers receive them, together with
our Values, our Beliefs, and Vision.
By the end of 2008, Natura had 849,600 consultants, an
increase of 18.23% from 2007. In Latin America, we recorded
an annual growth of around 38.6% to 119,500 consultants.
We have one of the lowest turnover rates among companies
using direct sales, which is a good indicator of the quality of
our relationship with the sales force. Our consultants identify
more with the value proposal and establish stronger
and more lasting ties with us, being loyal to the brand.
Available Consultants¹ (in thousands)
Brazil
Argentina
Chile
Mexico
Peru
Venezuela²
Colombia²
France
2006
561.1
24.3
8.9
5.0
18.1
n/a
n/a
n/a
2007
632.4
30.8
12.6
12.1
26.0
2.3
2.0
0.4
2008
730.1
37.3
17.5
20.0
35.2
2.8
5.9
0.8
1. This refers to the number of active consultants at the end of the year.
2. The operations in Venezuela and Colombia only started their sales in February and
June 2007, respectively. In France, the Maison Natura has been selling since 2005,
but the direct sales channel only opened in January 2007.
The implementation of the Natura Consultant Advisers
(NCAs) in Brazil allowed us to move even closer to our
consultants. Our relationship managers (RMs) support a
group of NCAs that work with the Natura consultants
(NCs) and their role is to attract potential candidates to
the consulting activity and advise them on their daily activities.
In addition to the relationship initiatives, the NCA model
encourages the growth of the sales force, bringing in a
significant number of new NCs. Above all, it also takes
advantage of the micro-regions, maximizing our regional
operation model. The NCA breathes new life into the job
of the relationship managers, with a total management cost
equivalent to the previous model. Over time it shoud
encourage a gradual growth in productivity.
To increase the business of our consultants in 2008, we
lowered the minimum order amount to allow for more
frequent order placements, reducing the waiting time of the
final consumer, and we also reward those consultants who
have the best performance with magazines and samples.
We are investing more and better in training. In 2008, we
focused heavily on the training of our sales force, with an
investment of R$ 20 million. Within the Sales Force Education
project, we implemented a new training course for the
112,721 NCs who are starting to work.
We train our consultants to work in accordance with our
ethics standards. Accordingly, we seek to fully comply with
the commitments we made when we subscribed to the
Direct Sales Conduct Code before Direct Sellers and
between Companies, of Brazilian Association of Direct Selling
Companies. We did not record any legal case of child, slave, or
dangerous labor in the consulting activity in 2008, as in previous
years. Also, we did not record any legal or administrative case
related to violation of privacy or loss of data of consultants.
In 2008, we experienced some problems with the quality
of the services provided to our NCs, and, consequently, to
our final consumers. We recorded a high rate of out-of-stock
products for sale, and we failed to make progress in delivering
ordered boxes, as we had committed to in 2007. We renew
our commitment to recovering the quality that has always
characterized our services.
Despite these facts, the annual satisfaction survey of our
consultants remained at the historical level of 90% favorable
responses, driven by the work of the NCAs. It mainly shows
the success of our type of relationship, in which proximity
is one of the main differences, in addition to the strength
of our launches, the expansion of our presence in the media,
and the strength and attractiveness of the Natura brand.
Our relationship practices affect consultants in many ways:
more than 2,700 NCs who have been with Natura for more
than 15 years were honored in 2008. Among launch events
and reunions, we relate to over 120,000 consultants.
NCs Satisfaction
Satisfaction of Consultants¹
Satisfaction - Favorable
Response Rate
Quality of Relationship²
NCAs Satisfaction¹
Satisfaction - Favorable
Response Rate
Quality of Relationship²
jan/07
jan/08
jan/09
90%
89%
90%
90%
88%
90%
jan/07
jan/08
1/1/2009*
93%
95%
87%
93%
93%
96%
1. Percentage of “Satisfied” and “Totally Satisfied” Consultants and NCAs in Brazil
(top 2 box)
2. Average of Climate category attributes.
* Until 2007, there was a NCA pilot program in the Mid-Western region; in 2008,
the project was extended to Recife, São Paulo and South of Brazil.
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
30 31
Júlia Cunha, 43,
educationist and Natura
Relationship Manager
Natura Houses
One of our priorities in 2009 will be the opening in São
Paulo of Natura Houses: spaces totally integrated with the
style of our brand. We want, more and more, to turn them
into places where our consultants, Natura consultant advisers,
sales promoters, and relationship managers can gather and
try our products. In these spaces, meetings, courses, and
training programs will also be held.
The first Natura House in Brazil was opened in 2007 in
Campinas, state of São Paulo. Using the lessons learned from
this experience, we plan to inaugurate five more Natura
Houses in 2009, thus allowing more contact and proximity
with the sales force. Another two Natura Houses were
inaugurated in Colombia, in Cali and Medellín. We expect
to inaugurate the units in Lima, Peru, Santiago, Chile, and
Monterrey, Mexico, in 2009.
Natura Movement
Created in 2005, the Natura Movement mobilizes our
consultants and promoters so that they can be local change
agents. In 2008, topics such as recycling, self-esteem
development, social inclusion, education, and civic awareness
were emphasized. One of the main projects taken up by
our consultants was the Natura Product Recycling program
implemented in Recife in 2007 and in São Paulo in 2008.
These initiatives encourage the NCs to collect, upon visiting
customers, the used packaging of Natura’s products, which
is then forwarded to transportation partners and sent to
local recycling cooperatives. In 2008, 118 metric tons of
post-consumption packaging was returned, providing
an alternative destination for waste.
We also work with make-up workshops, given by volunteer
consultants to physically and emotionally fragile women.
Until 2007, the workshops only took place in hospitals that
treated cancer patients but, from 2008, we included low-
income communities in Rio de Janeiro at the cultural centers
of the AfroReggae Group. Besides just teaching make-up
techniques, the objective is to promote exchanges, self-
knowledge, and interaction between people.
In São Paulo, our consultants were also encouraged to
participate in a survey conceived by Natura, the Our São
Paulo Movement, and the market research company Ibope
to verify the existence and quality of public infrastructure in
the city of São Paulo. We had more than 10,000 responses,
which provided a wealth of information to the public
authorities. As 2008 was an election year, we disseminated,
through our communication media, the importance of the
responsible vote and the active participation of all society
in political matters.
To learn more, please visit
www.natura.net/relatorio
Dialogue Channels
Our consultants already have many communication and
dialogue channels with Natura. The main ones are the
Natura website (www.natura.net) and the Natura Service
Center (CAN), which is a telephone service. CAN receives
orders and deals with matters that are directly related to
the NC’s business, such as information on promotions, the
status of orders, payment agreements, complaints, criticisms,
and suggestions. It is through this channel that they place
their orders for Natura’s products, in addition to obtaining
information on promotions, delivery, inventories, and
payment matters, among other things.
Daily Average of Calls to CAN1
(Natura Service Center)
Suppliers
For the production and distribution of products, we buy inputs,
services, and indirect materials from a varied range of suppliers
in different regions of Brazil and abroad. In 2008, we engaged
with 4,257 suppliers, 5.5% of which provide production inputs,
which are ingredients from nature, raw materials, packaging
materials, and finished products, and 94.5% of which provide
services or indirect ingredients or materials (such as office
supplies or cleaning products and parts for maintaining
equipment).
Our supplier strategy is in line with our improvements in
efficiency, quality, and relationships, which permeate the whole
company. We want to establish an increasing number of long-
term partnerships, since our suppliers are basic links in our
value chain.
We try to diagnose our suppliers’ needs of by means of the
satisfaction survey. The survey, reformulated in 2008, sought to
identify opportunities for improvement and allowed us to
determine corrective actions. The reformulation involved more
objective questions; results tied to principles, processes, and
areas, which makes the diagnosis easier and allows us to better
plan actions; result per supplying company (and no longer by
respondent); and increase of the sample, from 152 (in 2007)
to 487 (in 2008), particularly in the Services, Ingredients and
Indirect Materials segment (78% of the sample). Despite the
changes in the survey methodology, the results presented in
2008 are comparable with those from previous years.
41,571
37,889
32,754
Satisfaction of Suppliers - Favorable Response Rate
2006
2007
2008
1. Calls related to the Brazilian operations.
Internet Use
We saw in 2008 a significant increase in the use of the web
to place orders. This shows the effects of our campaigns
to encourage the use of this medium, particularly the
Connectivity Project, which as we had planned reduced
the number of calls received by our service center without
affecting the total volume of orders (CAN, Internet and
relationship managers), which grew 11.7%.
Our website contains an online reference file to allow the
easier registration of new consultants. In our manual process,
the average period for registering consultants is five days. Via
the Internet, this was reduced to one hour, easing the work
of the Relationship Manager and allowing for more
conversion of candidates into consultants. In 2008, 102,000
people became consultants via the online registration.
88%
84%
74%
2006
2007
2008
The favorable response rate was 74% in 2008, which represents
a drop of 10 percentage points from 2007. To the survey results,
we added the qualitative perceptions of our suppliers obtained
in the wikishop, a group dynamics carried out with
representatives of these stakeholders. The result revealed room
for improvement in the quality of the relationships and the
need to take effective action, to make mutual trust and value
generation more dynamic, and to improve the performance
of the supply chain. Therefore, next year, we will invest in
initiatives that will generate:
1. increased dialogue;
2. more sharing of information;
3. more appropriate return to the process of selection of suppliers;
4. better planning, organization and compliance with what
was agreed in the management of innovation projects
for suppliers of production inputs;
5. better payment process, particularly to suppliers of services,
ingredients and indirect materials;
6. and better production input planning and control process.
We are convinced that we need a long-term relationship
with our suppliers, and this requires us to face dilemmas
and challenges together.
Development, Evaluation and Certification
The Qlicar (acronym for Quality, Logistics, Innovation,
Competitiveness, Service, and Relationship in Portuguese)
program, created in 2004, aims to ensure the development
and high performance of our network of suppliers. Today,
it includes 68 suppliers, who were selected over the years
based on their history and business volume with Natura.
In 2008, the program evolved in three aspects: definition of
new governance, review of objectives and indicators tied to
each category, and equalization of the weights of each category
in the total score. We conducted two workshops to train
suppliers about new aspects of the program.
In the “Q” (Quality) category, we highlight the adoption of
the new indicator related to the Assured Quality program.
We started to receive the products of suppliers with
excellence in the Quality Rate as Assured Quality, eliminating
the need for Natura’s internal controls.
The “Delivery Window” was the main evolution in the “L”
(Logistics) category. Suppliers are given periods in which to make
their deliveries rather than specific times. The benefits included
a reduction in peak times for the receipt of products by Natura
and a reduction in waiting and unloading times for suppliers.
The main evolution with respect to the categories of Qlicar
was in the “C” category, which now means Competitiveness
instead of Cost and Contractual Conditions. The new meaning
intends to emphasize the need to constantly improve the
competitiveness of the supply chains of Natura’s suppliers.
Another relevant aspect regards self-evaluation and audits
of suppliers, which cover quality, environment, and social
responsibility requirements, including aspects related to
human rights. All the suppliers that are in Qlicar were audited
in accordance with these parameters in 2008. And all
contracts require the non-use of child, forced, or the
equivalent of slave labor.
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
32 33
Percentage of Self-evaluated or Audited Suppliers with
Respect to Quality, Environment and Social Responsibility
2008
2006
2007
Self-evaluated
productive suppliers
Audited productive suppliers
Audited Qlicar suppliers
93%
24%
NA
100%
36%
NA
100%
48%
100%
Supplier Communities
The sustainable use of inputs from the Brazilian natural
environment is the main technological platform of Natura. The
development of the supplier communities is essential for the
preservation of the environmental heritage. To establish and
maintain this network of relationships and insert it in the
business model is a challenge that Natura assumed a few
years ago to encourage environmental preservation and the
appreciation of traditional knowledge. The complexity of the
supply logistics (which involves costs, quality, and traceability
of inputs); the regulatory framework that is still under
construction that governs the many aspects of this relationship;
and the cultural and social diversity of the communities
involved make up a system that requires continuous effort.
Currently, we have 23 communities partnering with Natura,
located in the North, Northeast, Southeast, and South regions
of Brazil, and in Ecuador. In total, there are 1,895 families. This
group of communities is characterized by great diversity, both
cultural and socioeconomic. Additionally, they are located
in different ecosystems and have different forms of social and
institutional organization. These stakeholders range from small
groups of family farms in the South region of Brazil to
traditional extractivist communities with a large number
of families in the North region.
The supply chain includes manufacturers, who transform
the inputs originated in the communities into raw materials
for our products. In the case of Natura’s industrial unit of oils
and soap mass in Benevides (Pará), this relationship already
includes four supplier communities, and will be established
with other surrounding communities in 2009.
Supplier Communities
Communities with
which Natura relates
Benefited Families
Appropriated funds (R$)
2006
2007
2008
16
1,234
19
1,684
231
1,895
2006
2007
2008
722,264
300,000
204,478
36,410
20,000
49,450
504,661
863,647 2,238,1822
324,716 1,136,0173
671,868
755,126
10,248
38,409
18,042
49,907
23,347
41,700
129,482
396,137
Supply
Sharing of Benefits
Funds and Support
Image Use
Training
Certification and Handling Plan
Studies and Advisory
1. The increase is due to the inclusion of communities in Mexico, in addition to two
supplier communities that serve the Industrial Unit of Benevides.
2. The significant increase in the purchase price of inputs is due to the inclusion of
the purchases of the Industrial Unit of Benevides, from the communities in that region.
3.The increase in the amount of shared benefits is due to the fact that we paid, by
choice, for the contracts that are still awaiting the opinion of the Management Council
of Genetic Heritage. Pay-out values were established based on the amount of time
since the product was lauched.
Our relationship with these groups over the past few years
has been directly and indirectly guided by the many forms of
local value creation. In addition to the purchase of inputs, we
have established contracts for the sharing of benefits, and in
some cases we financially support the development of these
suppliers and their production chains. To learn more about
these indirect economic impacts, please refer to the chapter
Creation of Social Value.
While we are recognized for the progress we have made,
we still have a long way to go to establish quality relationships
with these communities. We need, for example, to improve
the instruments for measuring the social, environmental, and
economic impacts of our relationship.
In 2008, we conducted an extensive survey and analysis of
historical data of Natura’s relationship with the many supplier
communities, which generated an internal evaluation of the
quality of the relationship.
We concluded that, despite our progress in transparency
and dialogue in the processes of sharing benefits, joint
establishment of the fair price of the inputs purchased, and
in the strengthening of our relationship and communication
with the communities, we need to improve many aspects,
including the planning of demands, support for the
administrative education of the groups, and the negotiation
process of our supply contracts.
The lessons were used as bases for preparing the Relationship
Principles with supplier communities.
In 2008, we continued to structure the methodology and
indicators of the BioQlicar Program so as to improve the
commercial relationships with rural suppliers and influence
the adoption of sustainable corporate practices, in accordance
with the abilities of each community. Our strategy, as from
2009, will be to strengthen the relationships with communities,
guided by the Relationship Principles, by the implementation
of the BioQlicar program, and by a broader evaluation of the
quality of the relationship. The opening of new communities
is not expected in the short term, as we believe that our
focus now is to evolve with the current ones.
To avoid the possibility of any undesirable occurrence, we
included in our supply contracts a clause to avoid the risk
of child, forced, or compulsory labor in the commercial
relationship with Natura. Although we have not achieved the
target set for 2008, when we agreed to prepare a study and
implement actions in this field, we have maintained our
intention to prepare, now in 2009, parameters to evaluate
the cases in which the labor organization is culturally based
on family structure.
To learn more about our relationship with
the supplier communities, please
visit www.natura.net/relatorio
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
34 35
Brazil nuts, one of the
ingredients of the Ekos line
Consumers
Our commitment to all of our stakeholders is daily reaffirmed
in the manufacture of products that take Well-Being Well
to our consumers. We estimate that we have, in Brazil,
approximately 42 million consumers. Our relationship with
this Natura Community is based on a broad offer of products
backed up by our services. We work with a dynamic portfolio.
We always seek to develop it in an appealing way, with
adequate choice for all types of customers.
Not only do our products aim to meet the functional needs
of our consumers, but we also want them to awaken the
senses and develop people’s awareness of themselves, of
others, and of the world.
In 2008, our business structure, which was then based on
areas, evolved to the business and regional units model. As a
result, Natura will move closer to the final consumer. We will
have a portfolio of products and promotions that will arrive
faster at people’s houses and will meet local Brazilian
characteristics and needs.
Guided by the strategic goal of “Less is more,” we decided to
select the most important products in our portfolio. We must
recognize, however, that the reduction from 930 items to 739
caused some discomfort to our consumers, who had grown
used to some products that we discontinued. We believe that
this perception will be overtaken by the offer of products
that are more in line with our value proposal.
The indicators show that this change did not affect our level
of acceptance by consumers. Natura maintained its high
preference rate. In the Top of Mind category (first brand that
comes to consumers’ minds) of the Brand Essence survey,
we moved to 32%, compared with 27% in the previous year.
In 2008, we chose not to conduct the consumer satisfaction
survey. Due to the slight variation seen in the data from one
year to the next, the frequency of the survey will now be
biennial instead of annual.
Driven by the growth in the number of consultants and
by the increase in Brazilian family incomes, the rate of
penetration of Natura’s products has been consistently
increasing over the past few years. Between 2007 and 2008,
this rate grew 4.4 percentage points to 45.6%. The social
classes that contributed the most to this increase were classes
D and E (using the Brazil Economic Classification Criteria of
the Brazilian Association of Research Companies – ABEP ¹),
with 2.4%, that is, more than half of total growth.
¹ More information on www.abep.org.
Acceptance of Consumers (%)
Natura penetration*
(presence in Brazilian Households)
Global evaluation - Top Box
Loyalty
Would recommend
Preference
Awareness
Spontaneous
Stimulated
*Source: LatinPanel
2006
2007
2008
37.4
74
41.2
83
45.6
80
67
43
13
27
65
42
15
35
66
47
27
45
Communication with Consumers
The Natura Customer Service (NCS) is one of our main
channels of communications with consumers. Via this channel,
we receive complaints, criticisms, suggestions, and compliments,
in addition to questions. Due to the large investment we made
in 2008 in the training of NCS employees, we had positive
results from this service. The quality score increased from
91.5% in 2007 to 95.9%.
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
36 37
This result comes from the score the consumer confers upon
the service after using it, via the Customer Satisfaction
Instantaneous Survey. In 2007, we served 76% of the calls within
20 seconds and, in 2008, this rate increased to 87%. We also
managed to reduce the percentage of the non-answered calls
from 6.6% to 3.9% and the average waiting time from 18 seconds
to 8 seconds. Most of the NCS services refer to complaints
related to the exchange of products. On average, we change
70,000 products per month; in 2007 the figure was 49,000.
NCS (Natura Customer Service)1(calls in thousands)
Total
Answered
Not answered
1. Calls related to the Brazilian operation.
2006
2,204
1,664
540
2007
1,984
1,854
130
2008
1,530
1,471
60
As of December 31, 2008, 155 complaints about Natura had
been registered with the Consumer Protection and Advisory
Program (Procon), a foundation established by the public
authorities to protect consumer interests. Most referred to
dissatisfaction with a product (scent, incompatibility of the refill
and adverse reactions), agreed-upon delivery, exchange or
refund, and lack of understanding of the literature on the
packaging. All complaints are addressed at Procon, and Natura
makes agreements when the complaints refer to exchange
or refund of products.
Pedro Ávila, 3, and Ana Julia, 4,
use Natura’s products
Controversial Ingredients
Reaffirming our commitment of transparency, in
2008 we published on our website our position on
controversial ingredients, about which there is no
consensus by the scientific community with respect
to their possible harmful effects to human beings.
Parabens
Parabens are a group of preservatives made up of
short-chain and long-chain compounds. The long-chain
parabens are claimed to be harmful to human health,
although there is no scientific consensus on the topic.
Although Natura does use the short-chain parabens,
which are not harmful to health, in some of its products,
it chose to replace them in its new creations, eliminating
them from its entire portfolio by December 1, 2010.
Triclosan
The greatest concern about triclosan refers to the
fact that is widely used in the world, increasing its
concentration in nature with possible impacts on
the environment, as the substance affects water
microorganisms because it is a synthetic antimicrobe
that acts against the proliferation and growth of
microorganisms. Consistently with Natura’s sustainable
stand, we have since July 2008 replaced the use of
this ingredient in new products with plant origin
alternatives and constantly seek to develop new
less harmful antimicrobes.
Phthalates
Phthalates are a family of compounds used for many
different purposes, including as additives in the
manufacture of plastics and in the cosmetic industry.
There is controversy involving using phthalates in PVC
packaging. For this reason, we will ban the use of PVC
packaging that is in contact with our products from
January 2009. Natura also used a compound from
this family, diethyl phthalate, as a solubilizer of fragrances,
bittering agent, and alcohol denaturizer. When used
in low concentration, there are no indications that
diethyl phthalate can damage health. Nevertheless,
this ingredient may be mistaken for the controversial
versions of phthalates and so we have eliminated this
substance from our new products since June 2008.
Another important communication channel, Natura Magazine,
went through changes that significantly reduced its impact on
the environment. With the new editorial graphic design, the
number of pages was reduced, and the paper, which was
recycled before, was replaced by couche paper (a paper with
a satin finish) with the FSC (Forest Stewardship Council) seal,
which certifies sustainable handling from the extraction in the
forest to the final transformation of the raw material into a
printed publication. As a result, we ceased using 1,000 metric
tons of paper and emitting around 4,500 metric tons of
carbon dioxide into the atmosphere in 2008. In this and other
ways, we seek to set examples related to sustainable
development in our communication.
We strictly follow the rules of the Advertising Self-Regulation
Council and the codes of conduct of the Brazilian Association of
Advertisers and Brazilian Association of Consumer Protection.
In order to ease the access of the final consumer to Natura’s
products, we reviewed the prices of our products meant for
daily use so as to establish a habit of frequent use. Our objective
was for consumers not to have to wait for a promotion to buy
their favorite product. We also increased our investment in
advertising by 129% from 2007.
Finally, we published a book that helps children learn in a playful
way about the importance of water. With a print run of 550,000
copies, it was given as a gift to the consumers who bought
colognes from the Naturé line, which is aimed at children from
three to seven years old.
To learn more about our innovation initiatives,
please visit www.natura.net/relatorio
Consumer Health and Safety
The safety of our consumers guides all of our product
development processes. Under the supervision of the Product
Safety Committee, made up of professionals from different areas,
we take special care with all new ingredients and formulas, which
are carefully tested by dermatologists or multidisciplinary teams
and analyzed by specialists in product safety. We also maintain the
Cosmetic Vigilance System, which monitors possible adverse
effects of the products, as a reference for the innovation process.
This care meant that, like in previous years, in 2008 there were
no convictions, questioning by regulatory agencies (such as the
National Agency of Sanitary Vigilance and the National Institute
of Metrology, Standardization, and Industrial Quality) or fines
related to our products with respect to labeling or health and
safety impacts.
Innovation is also expressed on the packaging of our products.
In addition to a description of all ingredients used, which is
required by law, we have included in our launches since 2007
the environmental table, which explains the origin and
destination of the materials used, as a way to raise consumer
awareness with respect to the environmental impacts.
Surrounding Communities
Natura has a history of involvement with the communities
where it is present. We promote community development by
means of the relationship we have in Cajamar and Itapecerica
da Serra (São Paulo) and in Benevides (Pará), where our
operations are more expressive. In addition to promoting real
initiatives, our activity is based on the social involvement of all
sectors of society and a focus on issues that are important for
communities in developing the common good.
We have some challenges ahead. In Cajamar, we want to help
expand and strengthen democratic participation areas in
partnership with the different sectors of society. To this end,
we implemented the Agenda 21 Permanent Forum. We also
intend to contribute to overcoming environmental and social
challenges in an integrated way. Accordingly, we established the
Selective Collection Program in Itapecerica da Serra. In 2008,
we invested R$ 592,000 in both municipalities. The significant
increase compared to the previous year (R$ 391,500) was
a result of the use of funds from the Believing is Seeing
(Crer Para Ver) Program in projects to improve the quality
of public education in both municipalities.
Investment made
433.9 mil
391.5 mil
592.0 mil1
2006
2007
2008
1. Of the R$ 592.000 invested, R$ 249.200 are funds from the Crer Para Ver Program.
Over the years, we have been encouraging our employees to
work as volunteers in the schools of Cajamar and Itapecerica
da Serra. In 2008, 56 workers participated in reading and
information technology classes, benefiting 679 people. This
was less than in 2007, when we had 77 volunteer employees.
Thus, we intend to mobilize employees to increase the number
of participants in this program in 2009.
A significant portion of the effective job vacancies in the
operational area have been taken by employees from the
community surrounding our plant in Cajamar, which is why the
indicator has increased in recent years. The tendency for 2009
is for this figure to remain stable. In addition to permanent
employees, we have many temporary and outsourced
employees who come from our surrounding community.
Employees from the surrounding Communitites1 (%)
2008
18.2
Cajamar
Benevides
96
1. Itapecerica da Serra only has administrative personnel and does not account for
employees from the surrounding community.
2006
13.0
n/a
2007
16.9
96
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
38 39
Cajamar
Our efforts in Cajamar, city of our head office, were focused
on the dissemination, monitoring, and implementation of the
Master Plan in the municipality, which was approved in
December 2007. Its content is a result of the work on Agenda
21, the discussion of which we have been stimulating since
2003 in two of the town’s three districts – Polvilho and
Cajamar Centro. In partnership with the NGO Mata Nativa
and community leadership and associations from both districts,
we have been organizing district forums, which gathered about
190 people in 2008, to establish priorities for the
implementation of the Master Plan in the municipality.
Our work has been well received by the local community. In
2008, a survey conducted with representatives of civil society,
the third sector, and the government of Cajamar about our
participation in the development of the community evaluated
aspects of leadership, management, democratic participation,
education, and culture. It tried to understand whether our
efforts over 10 years met the interests and needs of the
community. We detected that the population clearly sees the
areas where we invest the most and realizes that our intention
is to contribute to the improvement of quality of life in the
community and to local sustainable development. The results,
discussed by the Natura Sustainability Committee, will be taken
into consideration in the preparation of new strategies and
initiatives in our work in the surrounding communities. We
must admit that we did not make progress in 2008 with the
program for the development of local suppliers.
With respect to encouraging improvement in the quality of
education, with funds from the Crer Para Ver program, we
progressed in our partnership with the Municipal Education
Board in projects such as the ParticipAção (ParticipAction),
structured with the support of the Public Policies Studies
Center of the State University of Campinas, which seeks to
bring parents closer to the academic life of their children.
We took this initiative to 29 schools in the municipal system,
and it indirectly benefited 11,000 students.
Itapecerica da Serra
In the local community of Itapecerica da Serra, we focus mainly
on the district of Potuverá, where we are located and which
has a population of around 9,000 people. We believe that our
actions can be replicated, benefiting an increasing number of
people. Accordingly, we established partnerships with the
publicsector organization to develop projects and public
policies of interest to the whole municipality.
Our main initiative in 2008 was to provide technical support
to the City Administration Office in the development and
implementation of the Selective Collection Program and the
structuring and strengthening of the Cooperative of Recyclers
of Itapecerica da Serra. The Selective Collection Program of
Itapecerica da Serra serves some education establishments,
public agencies, gated communities, and companies, with
Voluntary Delivery Points and door-to-door collection.
Currently, 16 metric tons of recyclable materials are collected.
We established a contract with the Cooperative for the
destination of solid waste in the town as from 2009, so
that our recyclable waste can contribute to the generation
of local income.
We have also been investing in developing the School Agenda
21, which resulted in selective collection projects in the schools
of the municipality and the wider region, which were organized
and reported in the publication “Tracking the paths of the
School Agenda 21.” With the support of Natura, the
separation and proper destinations of waste are already in
place in 57 schools (7 private, 34 municipal and 16 state
schools) and also in nine companies, six gated communities,
and in the district of Branca Flor.
Benevides
In our first industrial unit outside the state of São Paulo,
the industrial unit of soap products in Benevides (Pará), we
have some challenges ahead, among which are to strengthen
the quality of relationships in a region where social needs are
obvious. The occupation of an area that neighbors Natura’s
land and a number of lootings in the first half of 2008 are
examples of the difficulties we face. These events have
generated insecurity for the employees in that unit.
As a way to overcome such challenges, we are working
harder to strengthen our relationship with the surrounding
community, working on the organization and training of
complex extractivism chains, and promoting a sustainable
business model that benefits the community, the
environment, and our business. We invest annually in lectures
and training meetings for the suppliers in this community.
This will take time, and we still need to plant many seeds
to overcome obstacles such as lack of organization,
leadership, and knowledge for the management of business,
whether of cooperatives, associations, or unions, which,
therefore, become fragile and inefficient.
In 2008, we bought 152 metric tons of inputs from small
local producers. We used a model that favors extractivism
and family agriculture, thus strengthening our relationship
with communities and cooperatives. The local producers
with whom we do business are not only located in the
municipality of Benevides, but also in other municipalities,
but all must have the required socio-environmental
characteristics.
Purchases from Suppliers from the Surrounding
Communities of Plant Units (in R$ millions)1
Cajamar2
Itapecerica da Serra3
Benevides
2006
32.52
0.41
0.48
2007
45.99
0.82
6.45
1. The method for the consolidation of this indicator was changed; this is why historical
data have been restated. The amounts include taxes.
2. Calculation assumption: purchases from suppliers located in the municipalities
of Cajamar and Itapecerica da Serra, metropolitan region of São Paulo, Brazil.
3. New calculation assumption: purchases from suppliers from the state of Pará,
exclusive of the soap plant located in Benevides, in the North region of Brazil. This
operation started in May 2006.
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
2008
51.96
40 41
1.16
34.43
Government
We try to maintain a constant and open relationship with the
many spheres of the public sector so that we can participate
in the discussion of topics related to our business. Our goal
is to be recognized as an important participant in the debate
of public policies.
Our relationship with the government and with trade
associations and such entities takes place through our
department of Government Relations, a team of five
professionals responsible for communication with these
stakeholders. In the convergence between Natura’s strategic
planning and the national political agenda, we identify the
main focuses for each year. In 2008, our main efforts were
to contribute on the following issues: establishment of
a new regulatory framework for accessing Brazilian
biodiversity; fiscal policy; industrial and direct selling policy;
and regulatory environment of the personal hygiene,
perfumes and cosmetics sector.
Natura supported the initiative of the Brazilian Association
of the Personal Hygiene, Perfumery and Cosmetics Industry
(Abihpec) to present to the federal government a formal
stand on and suggestions for the new law on access to
genetic resources and traditional knowledge. For some years
now, we have been defending the need for new legislation
that protects the national genetic heritage and, at the same
time, ensures conditions for the research and development
of products based on our biodiversity.
We also work with the Management Council of National
Genetic Heritage an authority that regulates the matter in
Brazil, so that the terms of the current legislation on access
to genetic resources does not stop research on and
development of biodiversity. Our main dialogue partners
in this complex situation were the Ministries of Environment,
Development, Industry and Foreign Trade, Science and
Technology and their agencies, as well as the Office
of the Chief of Staff of the Presidency of Brazil.
With respect to fiscal policies, we have been working to adapt,
under the leadership of Abihpec and the Brazilian Association
of Direct Selling Companies (ABEVD), to the tax substitution
system implemented in 2008 in the state of São Paulo.
In partnership with ABEVD, we talked to the state treasury
departments on the tax policy in the states of Pará, Santa
Catarina, and Paraná.
With respect to the regulatory environment, in 2008
we worked on the improvement of the procedures and
requirements of the regulatory agency, the National Agency
of Sanitary Vigilance (Anvisa), so that our sector can have a
modern regulatory framework that promotes research and
development and strengths industry, establishing the position
of Brazil among the three largest markets in the world.
In order to further strengthen the dialogue channel that
we maintain with public agents, and in compliance with the
commitments made in 2008, we published our Relationship
Principles with the Government; our Integrity Policy against
Corruption and Bribery, in which we reaffirm our distance
from any illicit practices; our Campaign Donation Policy, in
which we clarify the option of our company not to make
donations to candidates or political parties, in or out of
election periods; and our stand about the practice of political
lobbying, in which we align ourselves with those favorable
to the practice exercised with ethics and transparency.
To learn about our policies and participation
in trade associations, please visit
www.natura.net/relatorio
Shareholders
Natura maintains a direct, transparent, and constant
relationship with its shareholders, investors, and capital
markets analysts. We provide information on our activities
and results in accordance with the best practices and the
rules of the Brazilian Securities Commission, which regulates
the disclosures of listed companies in Brazil, and the
BM&Fbovespa, where our shares are listed on the New
Market segment. We also seek to provide information
on the value we add through sustainability, whether via
teleconferences or events promoted by banks and
brokerages in Brazil and abroad.
To better evaluate how the capital markets perceive us, we
conducted a Perception Study for the second consecutive
year. Extensive interviews with investors in Brazil, the United
States, the United Kingdom, Germany, France and Singapore,
showed the opinions of professionals who know Natura very
well. The brand is seen as a strength, whereas constant
changes in the internationalization strategy appears as a
weakness. The study ended in an average score in 2008
of 4.1 points in a range of 1 to 5, higher than the 3.8
points in 2007.
Regular comments on the development of the company,
disclosed by the Investor Relations area, are approved by the
Audit Committee, the Brazilian Executive Committee (Comex),
and the Board of Directors, ensuring communications that
accurately reflect the evalue of the company.
Reversing the trend seen in recent years, the number of
Natura’s investors dropped significantly in 2008. The reason
was mainly the global economic downturn, which led many
investors, particularly individuals, to liquidate or reduce their
positions in stock exchanges all over the world. The drop
of the investment in Natura was 47.5%: from 20,798 in 2007
to 10,927 in 2008 - 91.5% individuals and 8.5% legal entities.
We recorded a growth in the investments of corporate
investors headquartered abroad, which represented
approximately 36% in 2007 and grew to 58% in 2008.
With respect to the number of outstanding shares, foreign
corporate investors hold 82% of the shares and, Brazilian
corporate investors 8%.
Profile of Shareholders
Individuals
Legal entities in Brazil
Legal entities abroad
Total
2006
2007
8,614
19,813
616
475
633
352
2008
9,993
396
538
9,705
20,798
10,927
In December 2008, the percentage of Natura’s outstanding
shares in relation to total capital stock was 25.53%, which is in
compliance with the minimum requirement of 25% by the New
Market, the highest level of corporate governance on the São
Paulo Stock Exchange, where our shares are listed.
Corporate Structure
Shareholders
Majority shareholders
Treasury shares
Management shares
Outstanding shares
Total shares
Interest
73.42%
0.00%
1.05%
25.53%
100.00%
Number of Shares
314,993,430
20,955
4,508,030
109,562,334
429,084,749
The performance of Natura’s shares in 2008 was very
peculiar. The effect of the global economic downturn, which
caused share prices on the Brazilian capital markets to drop
from September, was not reflected with the same intensity
on the prices of our shares. In fact, whereas the main index
of the São Paulo Stock Exchange (Ibovespa) dropped 41%,
Natura’s shares appreciated 18%. The main drivers of this
performance were the company’s low level of indebtedness,
high cash generation, high profitability, and an active, sensible,
and secure treasury department. Additionally, our action plan,
aimed at increasing sales in Brazil, started to show its first
results, increasing confidence of the company’s investors
and shareholders.
Natura’s shares (Natu3), traded on the BM&Fbovespa,
have appreciated in total 213% since their IPO, whereas
the Ibovespa appreciated 99% in the same period.
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
42 43
Performance of Shares
2008 Performance - Natu3 vs. Ibovespa (Axle x)
180
170
160
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
-10
-20
Disclosure
4Q07
Disclosure
1Q08
Disclosure
2Q08
Disclosure
3Q08
101%
7
0
c
e
d
8
0
n
a
j
8
0
b
e
f
8
0
r
a
m
8
0
r
p
a
8
0
y
a
m
8
0
n
u
j
8
0
l
u
j
8
0
g
u
a
8
0
p
e
s
8
0
t
c
o
8
0
v
o
n
8
0
c
e
d
We remained on the leading Brazilian share market indexes –
Ibovespa, IbrX-50, IbrX-100 (which list the most liquid shares
on the stock exchange), the Tag Along Share Index (Itag),
the Corporate Governance Index (IGC) and the Corporate
Sustainability Index (ISE), which uses sustainability criteria to
select shares of listed companies and on which Natura has
been included since its inception in 2005. Natura is also part
of the Morgan Stanley Composite Index (MSCI), which is
a reference for foreign investors.
Total Traded Volume (R$ million)
3,695.0
7,192.0
4,627.0
2006
2007
2008
In 2008, we participated in many conferences abroad, in
addition to road shows in the United States, Europe, São
Paulo and Rio de Janeiro. In these events, we had contact
with approximately 1,500 investors, individuals, analysts,
and fund managers. Another form of direct communication
between Natura and investors is our Investor Relations
website, which makes available the “Talk to the IR” service.
Information on the events in which we participate,
comments on our performances, data on corporate
structure, and the history of our dividends may be found
on the website.
Payment of Dividends
On February 18, 2009, the Board of Directors approved
a proposal to be submitted for the Annual Shareholders’
Meeting on March 23, 2009 for the payment of dividends
and interest on capital with respect to the results accrued
in 2008 in the amount of R$ 442.2 million and R$ 57.5 million
(R$ 48.8 million, net of withholding income tax), respectively.
Of this amount, dividends related to the results for the first
half of 2008 amounting to R$ 188.0 million were paid on
August 10, 2008. The remaining balance, to be paid on April
8, 2009 after being ratified by the Annual Shareholders’
Meeting, will be R$ 254.2 million in the form of dividends
and R$ 48.8 million in the form of interest on capital
(net of withholding income tax).
The aggregate of these dividends and interest on capital
related to the results for 2008 will represent net earnings
of R$ 1.15 per share (R$ 0.95 per share in 2007),
corresponding to 98.0% of the generation of free cash
and 90.6% of net income for 2008.
To learn more about our participation
in the capital markets, please visit
www.natura.net/investidor
Creation of Social Value
The story of Natura shows how corporate activity may be
aligned with social development. In 2008, we resumed increasing
the creation and distribution of wealth to all our stakeholders.
There was an expressive increase in the distribution of wealth
to consultants, from R$ 1.7 billion in 2007 to R$ 2.0 billion in
2008. However, we are still not satisfied, and we believe we
can progress further in our social indicators.
Distribution of Wealth (R$ million)
Shareholders
Consultants
Employees
Suppliers
Government
2006
359.4
1,583.9
379.7
2,132.3
817.1
2007
415.1
1,722.1
390.3
2,329.7
948.2
2008
499.7
2,023.8
571.9
2,567.3
1,032.2
In May 2008, a survey conducted by Ipsos Loyalty using the
Brazil Economic Classification Criteria of the Brazilian
Association of Research Companies (ABEP)¹, outlined the
profile of our consultants. It showed that the majority (86%)
are from classes B and C and that the sale of Natura’s products
is an important supplement of family income. The sales produce
from 20% to 50% of family income for one third of consultants.
Over half of them have more than one child at home. In all
regions of Brazil, at least half of them sell only Natura products.
¹ More information on www.abep.org.
This is the only or main source of income (75%) for the majority
of the Natura Consultant Advisers (NCAs) For 53% of them, this
activity represents somewhere between 20% and 50% of family
income. Most of them (68%) are from class B and their main
motivation to sell Natura’s products is, in addition to the income,
the possibility of learning and establishing new relationships.
To learn more about the profile
of our consultants, please visit
www.natura.net/relatorio
We also create value for the communities that supply the
ingredients from biodiversity and which receive funds in four
different ways: for the supply of raw materials; the sharing
of benefits from the access to the genetic heritage or
associated traditional knowledge; use of image; and in funds
and agreements to promote sustainable development.
In 2008, 14 contracts for the use of the genetic heritage and
sharing of benefits (Curb) were signed, eight with communities
and six with other players (companies, government and
farmers). We also paid for Curbs related to the processes
that were still being analyzed by the Management Council
of Genetic Heritage (CGEN), which is linked to the Ministry
Natura Cajamar Unit (state of São Paulo),
company’s head office
of the Environment (MMA). With the knowledge of this agency,
Natura opted to make the payments to the communities,
as it was already being benefited by these contracts. Most of
the processes related to the sharing of benefits of Natura are
still under analysis in the CGEN. As instructed by the agency,
we made payments for all the contracts filed, which included
processes that started in 2004. In some cases, the payments
related to the sharing of benefits referred to products
launched in 2001. Therefore, the impressive increase in the
amounts related to the sharing of benefits is related to the fact
that, until 2007, Natura had paid only for the contracts that
were authorized by the CGEN (three supplier communities
and five companies and family farmers) until 2008. In 2008,
however, we made payments for the 19 filed contracts.
Learn more about the indirect financial impact on
the supplier communities in the Chapter Suppliers
and Supplier Communities.
Distribution of Wealth to Supplier Communities
Use of image (R$)
2006
2007
2008
36,410
38,409
10,248
Funds and support (R$)
204,478
755,126
671,868
Sharing of benefits from
the access to genetic
heritage or associated
traditional knowledge (R$)
300,000
324,716 1,136,017
Investment Matrix
Crer para Ver (Believing is Seeing)
The amount of Natura’s investments in corporate responsibility
was maintained at the same levels as the previous year. The
highlights were related to the environment, thanks to the
investments in carbon offset projects and consultants. There
was an increase in the amounts invested in Natura Movement
and society, in support and sponsorships.
There was a reduction in investments in corporate education,
which followed the 2008 restructuring process. The training
courses to the sales force, as well as to the plant staff, which
are focused on quality of relationships and sustainability,
remained unchanged. Thus the corporate education area
was preserved since we had a lot of activity at lower costs.
In the Matrix, we consolidated investments in projects or actions
that are not intrinsic to Natura’s business and go beyond
the legal requirements.
Matrix for Investment in Corporate Responsibility
(R$ thousands)
2006
2007
2008
1.4%
1.0%
18,729.3
19,084.0
2,566.8
1,801.4
270.9
468.3
212.8
232.3
647.0
1,993.1
342.8
391.5
8,777.4
7,058.7
5,467.2
1,849.1
37,014.2
34,185.1
7,148.3
9,591.9
28,807.0 43,776.96 44,162.48
1.2%
Employees, families
11,637.5
and third parties
1,387.6
Consultants
380.0
Consumers
130.0
Suppliers
1,141.7
Supplier communities²
433.9
Surrounding communities
7,453.9
Government and society
Environment
442.7
TOTAL invested per stakeholder 23,007.3
Management expenses
5,799.7
TOTAL Natura funds
Percentage of net revenues
Net funds raised by consultants
in the program Crer para Ver3
Invested tax incentives
Rouanet Law
Audiovisual Law
ICMS (state Value-Added Tax)
in Minas Gerais
ICMS (state Value-Added Tax)
540.7
in São Paulo
1% Income Tax to CMDCA4
0.0
1% Income Tax to Condeca5
1,015.0
TOTAL GERAL
54,738.0
1. The amounts invested in support and sponsorships are also taken into consideration
in this matrix, but they are split among the benefited stakeholders.
2. The amount for 2007 was recalculated, excluding the total amount related to the
sharing of benefits.
3. For further information, please see the chapter Quality of Relationships.
4. CMDCA: Municipal Councils for the Rights of Children and Adolescents. In 2008,
1% Income Tax was transferred to Condeca.
5. Condeca: State Council for the Rights of Children and Adolescents.
0.0
160.2
388.0
38,174.0
814.3
227.0
445.0
53,007.2
2,852.8
400.0
2,059.5
1,098.0
1,936.3
0.0
5,382.4
1,500.0
2,101.6
3,767.0
2,484.8
2,000.0
Education is the primary force for structural change in society.
For this reason, since 1995, we have been developing
Crer para Ver, a program to improve the quality of education
in Brazilian public schools. It is based on the participation
of our consultants, who sell without profit products exclusively
developed for the Crer para Ver line.
The funds raised without profit to Natura or remuneration
to consultants make many projects possible. In 2008, we
launched new products for the line in the Brazilian portfolio,
such as the post-it kit, set of pencils, and shopping bags, which
are an alternative to plastic bags.
In Brazil we raised a total of R$ 3,767,000, R$ 3,381,000 of
which were invested in educational initiatives. That difference
is explained by the fact that the total amount raised in one
year goes to a fund that invests in many projects supported
by the program in the following years. In 2008, we launched
the Crer para Ver program in some countries in Latin America,
such as Argentina.
The total annual investment in projects of the Crer para Ver
program dropped in 2008 due to the end of the campaign
whereby consultants encourage enrollment with the Education
of Youngsters and Adults (EJA), a program of the Ministry
of Education (MEC). This program had achieved maturity
and stability; encouraging a return to school is already part
of our consultants’ routine. Between 2006 and 2008, our
team sent over 170,000 people back to school.
Investment in Education for the Benefit of the Government
in Brazil (R$ thousands)
Funds raised from the
Crer para Ver program
Total amount from the projects
developed and supported by
the Crer para Ver program
2006
2007
2008
5,382.4
2,487.8
3,767.0
3,104.0
4,330.0
3,381.0
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
46 47
To learn more about the projects
of the Crer para Ver program, please
visit www.natura.net/relatorio
Support and Sponsorships
Invested Natura Funds1 (R$)
Sustainable development
Women’s entrepreneurship2
Strengthening of civil society
organizations
Appreciation of Brazilian
culture focused on music
2006
2007
2008
2,190,179 2,519,801 2,782,000
-
164,886
-
1,442,420
1,270,777 1,771,879
741,047
780,785 1,327,403
1. Natura also invests funds by means of incentive laws; see investment matrix on
page 47
2. In 2007, the guidelines for support and sponsorships were revised and, in order
to align them with Natura’s strategic options, the Women’s Entrepreneurship
guideline was extinguished.
To learn more about the main projects
supported in 2008, please visit
www.natura.net/relatorio
Our support and sponsorships work covers three fronts:
sustainable development, strengthening of civil society
organizations, and Brazilian culture. At the cultural level, we
continued with the Natura Musical project, which supports
initiatives that showcase Brazil’s musical heritage. The projects
are chosen through invitations to bid, based on tax incentive
laws. In 2008, Natura Musical sponsored 31 projects all over
Brazil, in addition to the other 79 projects supported since
its launch in 2005.
Our support and sponsorship guidelines are a way of aligning
investments in institutional projects with the beliefs that guide
our corporate behavior. We also guide our sustainable
development work toward conscious consumption initiatives,
social inclusion, and incentives for urban green areas. We try
to select initiatives that provide society with a closer and
more integrated experience with nature in urban areas, so
as to promote awareness of interdependence and knowledge
of biodiversity.
We sponsor make-up workshops, given by volunteer
consultants to physically and emotionally fragile women.
Until 2007, the workshops took place only in hospitals that
treated cancer patients. From 2008 we included low-income
communities in Rio de Janeiro at the cultural centers of the
AfroReggae Group. The objective is to promote exchanges,
self-knowledge, and interaction between people.
We continue to support entities and associations that
represent our sector and contribute to sustainable
development. Accordingly, we support the Brazilian Association
of Corporate Communication in offering courses to journalists
on the Global Reporting Initiative (GRI) guidelines, and the
GRI itself in its mission to develop globally accepted standards
for sustainability reports through a process of stakeholder
engagement. We have also supported the Ethos Institute
since its foundation in 1998, as well as its campaigns and pacts
in favor of the dissemination of corporate social responsibility
in Brazil, among which are the Corporate Pact for Integrity
and against Corruption.
Environmental
Performance
In 2008, we took important steps to improve our
environmental performance. One of the most important
was the Carbon Neutral project, a program responsible for
reducing our greenhouse gas (GHG) emissions by 33%
between 2007 and 2011. We also started to offset carbon
emissions by means of support for five reforestation and
renewable energy projects. As part of the sustainable
management of waste, we focus on recycling projects, including
post-consumption recycling. We also implemented new water
and energy consumption reduction policies in our units.
Carbon Neutral
The crises arising from climate change require a change
in consumption and production patterns. Companies that
understand the challenges of their times will make a difference
in the future. For this reason, we implemented in 2007 the
Carbon Neutral project to reduce and offset GHG emissions
in all stages of our production chain – from the extraction
of raw and packaging materials, to internal processes and
transportation of products, through to their disposal.
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
48 49
The great innovation of this project lies on the fact that
Natura committed to a complete plan on three work fronts
(inventory, reduction, and offsetting), involving all of its
production chain. We are committed to reducing relative
emissions by 33% between 2007 and 2011 in relation to total
emissions in 2006. In 2008, we achieved the planned internal
target and eliminated 3.0% of our emissions, totaling 9.0%
in two years.
To realize these reductions and offsets, we put into practice
an inventory to quantify our emissions in all stages of the
production chain, based on the standards of the Greenhouse
Gas Protocol Initiative and the standard of the Brazilian
Association of Technical Standards NBR ISO 14064-1,
which establishes principles for the conception, development,
management, and preparation of company reports on GHG
levels. In 2008, we progressed in our monitoring on a four
month basis to measure results achieved, and had the annual
results verified by independent experts.
In 2008, we were responsible for the emissions of 188,051
metric tons of CO2 equivalent, a rate that is 5.03% higher than
2007, when it was 179,040 metric tons. Our previous report
had a different figure: 183,619 metric tons. The change is
a result of a revision of consumption data, inclusion of new
emission processes, improvement of calculation methods, and
an update of emission factors based on international standards.
Thus following the GHG Protocol, the base year was
recalculated, thereby maintaining the same basis for
comparison over the years, and the emissions for 2006
and 2007 published in this report have been restated.
Total CO2e (metric tons)1
172,762
179,040
188,051
2006
2007
2008
Relative emissions
(kg of CO2e/kg of product billed)
3.93
3.69
3.57
2006
2007
2008
1. CO2e (or CO2 equivalent): measure used to express the greenhouse gas emissions based
on the global warming potential of each gas.
We undertook in our company initiatives to reduce GHG
emissions in all stages of our production chain, such as the
use of organic alcohol in formulas, the encouragement of
transportation of products by ship, the change in the policies
for paying for fuel for our fleet in order to stimulate the use
of alcohol, the optimization of packaging, and the expansion
of the use of recycled materials.
As it is not possible to reduce all our emissions, we made
a commitment to neutralize them and introduce to our
customers carbon neutral products. In order to offset the
GHGs in 2007, we selected, by means of invitation to bid,
five offsetting projects, from different regions of Brazil, two
of which are agroforestry efforts to reforest devastated areas
and three are renewable energy actions.
Reclaiming the landscape and agroforestry systems – Pontal
de Paranapanema (state of São Paulo). In partnership with
the Ecologic Research Institute, it aims to reforest and
generate income for settled families. Our commitment
is to sequester 60,000 metric tons of CO2 in 30 years.
Recovery and preservation of natural resources in rural
settlements - Region of Cantão (state of Tocantins). Developed
by the Ecológica Institute, this project is focused on the recovery
of devastated areas and encouragement of the sustainable use
of natural resources. Our commitment is to sequester 60,000
metric tons of CO2 in 20 years.
Use of renewable biomass in the ceramics industry –
São Miguel do Guamá (state of Pará), Cristolândia (state
of Tocantins) and Paraíso do Tocantins (state of Tocantins).
In partnership with Ecológica Assessoria, it replaces the
thermal energy arising from the burning of wood from native
forests in the ceramics industry by renewable energy such as
rice husks and sawdust provided by legal lumber companies.
Our commitment is to sequester 60,000 metric tons of CO2.
Cooperatives of Small Hydroelectric Plants – Ijuí, Erechim
and Santa Rosa (state of Rio Grande do Sul) The three plants
generate and distribute clean energy to rural areas. Our
commitment is to sequester 14,000 metric tons of CO2.
Replacement of fuel oil by biomass with sustainable handling
– Jaraguá do Sul (state of Santa Catarina). In partnership
with AMC Têxtil, this project replaces the fossil fuel used
in the textile industry by wood chips, a waste product from
the process of transforming biomass extracted by means
of sustainable handling. Our commitment is to sequester
30,000 metric tons of CO2.
In 2008, we held a major event to mark the opening of
the invitation to bid for the 2009 projects, launched on
the Environment Day, June 5, at Natura’s head office in
Cajamar. On the same day we launched our reformulated
website, with all the requirements and explanations about
the invitation to bid, which was open for three months.
We received 61 proposals. They were all internally evaluated
with the help of a specialized consulting firm. The best
proposals were discussed by the technical team of Natura
in a panel of specialists, with external guests helping in a
semifinal evaluation. The selection should also consider five
projects that reflect the geographic needs and that are
different from the projects supported in 2008.
The Carbon Neutral project yielded many positive results,
such as the invitation to Natura by the United Nations
Environment Programme to participate in the Climate
Neutral Network, a global virtual forum on climate change.
In Brazil, we received the Época Climate Change Award of
the Época Magazine, which chose us as the company with
the best carbon emissions reduction strategy in Brazil. For
the second consecutive year, our socioenvironmental data
are being validated by Det Norske Veritas.
To learn more about the details of the
carbon offsetting projects we support, please
visit www.natura.net/carbononeutro
Our NOx and SOx gas emissions are not significant and,
for this reason, we did not monitor their emissions. Neither
have we used substances that destroy the ozone layer.
Biodiversity
One of the main vectors of innovation is the sustainable
use of biodiversity. This approach leads to the creation and
development of new products, using native and exotic species
and ecological models of plant production, our program for
the certification of inputs and partnerships with rural suppliers,
such as traditional communities and family farmers who may
contribute to preserving biodiversity. We work to establish
a new regulatory framework for the access to Brazilian
biodiversity to protect the national genetic heritage and
ensure favorable conditions for research and development.
After months of study, we prepared and approved, at the
end of 2008, the Policy of Sustainable Use of Biodiversity
and Traditional Knowledge, which will be fully implemented
in 2009. The policy seeks to comply with the precepts of the
Convention on Biological Diversity signed by Brazil during
the 1992 Earth Summit.
This document establishes the use of biodiversity as a vector
of sustainable development, the appreciation of ethical and
transparent relationships with the many stakeholders, the
application of the well-founded principle of prior consent, the
harmonious use of traditional knowledge and scientific rigor
in the development of products, stakeholder engagement,
establishment of networks, appreciation of cultural heritage
and traditional knowledge as elements of local and global
socioenvironmental sustainability, minimization of impacts,
sustainable handling, certification, and the sharing of benefits,
appreciation of work, and fair price based on value chain analysis.
Certifications
To ensure that the inputs used as raw materials in our
products are extracted in a sustainable way that benefits
the extracting communities, we prepared the Program for
the Certification of Plant Raw Materials in 2008. Its objective
is to promote sustainable cultivation and handling by means
of the certification of plantation areas and native forests.
The program is an important instrument for developing civic
awareness because it includes groups of family farmers and
traditional communities in Natura’s business chain, generating
income and stimulating local organization. Based on the
uniqueness of each region and production area, it adopts three
different certification models - organic, forestry, and sustainable
farming - while observing the criteria of the Instituto
Biodinâmico (Biodynamic Institute), the Forest Stewardship
Council and the Sustainable Agriculture Network.
We achieved the target set for 2008 to certify another four
ingredients, among which is Palo Santo, certified in Ecuador
by Ecocert Equador. The other three are organic certificates
in partnership with the certifying agency IDB. Therefore, we
ended the year with 26 certified ingredients. From the total
number of certified ingredients, two have been excluded:
the essential oil of rosewood, which is now synthetic, and
the tonka bean, which will not continue to be supplied due
to difficulties in obtaining production volumes.
Certified Ingredients
Total certified ingredients (unit)
Percentage of total certified species
2006
22
63%
2007
24
51%
2008
26
54%
* Only plant inputs in the form of waxes, oils, extracts, or essential oils are considered.
Two species used in the production of inputs acquired by
Natura – the Brazil nut (Bertholletia excelsa) and yerba mate
(Ilex paraguariensis) – are on the list of endangered species
compiled by the Brazilian Institute of the Environment and
Renewable Natural Resources (Ibama) and the International
Union for the Conservation of Nature and Natural Resources.
In order to reduce possible impacts on the populations of these
species, we acquire these inputs from areas certified by the FSC,
which not only attests to their compliance with legislation,
but also with other socioenvironmental criteria.
In 2008, we financed a study, in partnership with the Brazilian
Company of Agriculture and Cattle Raising, on the populational
and genetic structure of these two species, enhancing
knowledge that may be used for their preservation.
Environmental Impact of Products
In order to evaluate the environmental impacts of the
packaging of Natura’s products, we have since 2001 been
using Life Cycle Assessment (LCA), a tool that quantifies the
environmental impacts of products in the stages of extraction
of raw materials, production, use, and final disposal. In 2008,
we continued to progress in the reduction of environmental
impacts related to Natura’s packaging, which are measured
by our LCA indicator per kilogram of billed product. We
achieved our reduction goal thanks to three factors:
(cid:129) Reduction of related masses and better eco-efficiency of
commercial support materials, such as the Natura Magazine,
which was reformulated in 2008;
(cid:129) Design of packaging that includes a constant focus on the
reduction of impacts in the development of new products.
We changed, for example, the specification of the Natura bag,
which at the beginning of 2008 started to be produced
from 100% post-consumption recycled paper;
(cid:129) Positive effects of the product mix sold, with the faster
growth of products with less impact, such as the soap bars.
Environmental Impact of Packaging
per Quantity of Products (mPt/kg)
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
50 51
83.2
73.4
71.3
2006
2007
2008
With respect to the sale of refills, we ended 2008 with a better
result than the target of 18.5%.
Percentage of Refills on Billed Items (%)
2006
2007
Brazil
Argentina
Chile
Mexico
Peru
France¹
Colombia²
Venezuela²
19.8
17.1
9.0
7.9
15.5
9.6
n/a
n/a
21.3
21.1
16.1
11.2
21.3
9.9
8.1
6.0
2008
19.86
20.69
16.11
11.63
21.37
9.3
12.12
8.09
1. The historical data on refills in France were changed because the previous calculation
method was different from the one adopted by the other operations. In 2008, the
calculation was standardized based on the guidelines that are already used in Brazil
and other countries in Latin America.
2. The Colombian and Venezuelan operations started up in 2007.
Materials Used Arising
from Recycling (%) 1 2
7.8
10.7
13.0
2006
2007
2008
1. The indicator takes into consideration packaging materials and materials for
distribution (magazines, distribution boxes, and bags) that are recycled post-
consumption.
2. The criteria for the determination of this indicator were reviewed, which is the reason
why the historical data were changed.
Water and Effluents
In 2008, we reduced the consumption of water per unit
billed by 8.91%. Therefore, we had a reduction of 2.05%
absolute consumption, achieving the target proposed in the
previous year. As we consider water a highly important
resource, not only for Natura, but also for society at large, we
plan to intensify our efforts in this field from 2009 onwards.
We developed a number of approaches to save this natural
resource. At the plants, for example, we optimized
consumption by means of an awareness raising effort in
the process of washing reactors. We also implemented
an emergency service to manage, in the short-term,
water leakages.
At the Itapecerica da Serra unit, we requested the São Paulo
Water Company to install individual meters to allow us
to separate our water supply system from that of the
neighboring district. Water saving, as well as energy saving,
was included as a global target in the company’s collective
and individual evaluation for profit sharing. The Water and
Energy committees, created to meet the targets, work on
a multidisciplinary basis to develop studies, projects, and
technologies for the purpose of obtaining greater energy
and water efficiency in our processes, by means that do
not impair the quality of our products.
All the water we use is extracted from the water table,
from whence we withdraw a maximum of 80% of what we
are permitted to use, respecting the natural reestablishment
of the resource.
Water Consumption
2006
2007
2008
Water consumption in the units
of Cajamar and Itapecerica
da Serra (cubic meters)
Water consumption in other
Natura units in Brazil (cubic meters)1
Total consumption of water
(cubic meters)
Water consumption
per unit billed (L /unit)2
141,883 114,694 112,342
NA
2,757
11,894
141,883 117,451 124,236
0.53
0.42
0.38
1. Refers to advanced centers, office in Alphaville and Natura House Brazil. This
information started to be gathered in 2007.
2. In the previous years, this indicator was reported in liters per unit sold, which is
the reason why the historical data was changed.
Total Volume of Water Recycled and Reused
Recycled and reused water
(cubic meters)
Reuse percentage on total water
treated at the effluent treatment
station (%)
1. Refers to Cajamar and Itapecerica da Serra.
2006
2007
2008
40,209
29,773 35,824
42
36
38
In 2008, 280 liters of sodium hydroxide were spilled at our
unit in Cajamar, leaking from a container with a damaged
valve that was delivered by one of our suppliers. We
conducted an environmental assessment of the possible
environmental damages and did not find any indications
of pollutants in the river drainage system. In order to avoid
problems like this we developed an action plan for
improvements at the chemical products loading and
unloading areas, as well as to assess the risk in other
potentially vulnerable areas.
To learn more about the effluent
management data, please visit
www.natura.net/relatorio
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
52 53
Energy
By means of a multidisciplinary committee created in 2008,
we intensified the monitoring of electric energy consumption
by area, establishing priorities, and implementing new conscious
consumption technologies. During the year, we held the
awareness week, Saving with Full Energy, which involved
around 3,000 employees. Another important factor was the
drop in the average temperature for the year, allowing
for a reduction in the use of air conditioning, a big energy
consumer. We had a reduction of 16.88% in the total
consumption of energy per unit billed in 2008.
Total Energy Consumption (joules)
2006
2007
2008
131.7 x 10¹² 135.9 x 10¹² 126.38 x 10¹²
13.4 x 10¹²
8.2 x 10¹²
139.8 x 10¹²
131.7 x 10¹² 144.1 x 10¹²
Energy consumption in the units
of Cajamar and Itapecerica
da Serra (joules)
Other Natura units in Brazil1
Total energy matrix (joules)
Energy consumption - Energy
matrix per billed unit (kjoules/unit)2
424.1
1. Refers to advanced centers, plant in Benevides, office in Alphaville and Natura House
Brazil. This information started to be gathered in 2007.
2. In the previous years, this indicator was reported in kjoules per unit sold, which is the
reason why the historical data was changed.
469.5
510.2
NA
To learn more about the energy
management data, please visit
www.natura.net/relatorio
Waste
The solid waste generated at Natura is managed by a
systematized process covering the stages of separation,
classification, storage, collection, transportation, and final
destination. These activities are planned and developed
prioritizing actions for the reduction, reuse and recycling of
waste in order to reduce the environmental impacts of these
processes. Although total waste generation has been
accompanying Natura’s growth - in 2008, for example, it
increased 8% from the previous year - production per unit
billed has been falling, down 6.95% in 2008 to 22.4 grams
per unit from 24.1 in 2007.
We incorporate waste management policies and procedures
into all units, multiplying the sustainable ways of managing
solid waste. In 2008, we prepared in partnership with the
Supplier Quality Management the requirements for
distribution centers and transportation companies, which
include procedures for the proper management of waste
in these units. Additionally, we improved the composting
process that is internally conducted at the Natura Cajamar
unit, where the waste from the preparation of food is turned
into organic composts used as fertilizer in the unit gardens.
Our commitment to recycling of the waste we generate has
been consolidated over the years. In 2008, we developed
more robust processes for the separation of materials from
obsolete cosmetic products to ensure that more waste goes
for composting. The efforts to change the final disposal
methods and the training of employees on the importance
of the proper separation of waste, of recycling, and reducing
the consumption of materials have been showing below-
expectation results. The percentage of waste recycled was
0.3 percentage points below the target set for the year.
We also established a Waste Committee, a multidisciplinary
group whose purpose is to develop projects for the
reduction, reuse, and recycling of waste, as well as
awareness-raising actions and training in the collection
and proper disposal of solid waste.
Total Weight of Waste per Unit Billed1 (grams/unit)
25.7
24.1
22.4
2006
2007
2008
1. In the previous years, this indicator was reported per units sold, which is the
reason why the historical data was changed.
To learn more about the waste
management data, please visit
www.natura.net/relatorio
Economic
Performance
Consolidated net revenues totaled R$ 3.6 billion, 17.7% higher
than in 2007. Net income of R$ 542.2 million was 17.3%
higher than in the previous year and EBITDA totaled R$ 859.9
million, growing 22.5% in relation to 2007. The EBITDA margin
of 23.8% was above the guidance for the minimum of 23%
disclosed at the beginning of the year, and which remains for
2009 and 2010. At the end of 2008, our cash balance
amounted to R$ 350.5 million and our net indebtedness
corresponded to 0.11 times EBITDA for the year.
Consolidated Net Revenues
In the fourth quarter of 2008, consolidated net revenues
totaled R$ 1.145 billion, growing 22.0% in relation to 2007. In
Brazil, net revenues increased 20.1% and abroad, the increase
was 63.6% in Brazilian reais (43.5% in weighted local currency).
In 2008, consolidated net revenues totaled R$ 3.618 billion,
growing 17.7% in relation to 2007. In Brazil, net revenues
increased 16.3% and abroad, the increase was 45.9% in
Brazilian reais (45.9% in weighted local currency). The share
of revenues from the foreign market in total revenues
increased from 4.7% in 2007 to 5.9% in 2008.
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
54 55
Consolidated Net Revenues (R$ millions)
2,757.0
3,072.7
3,618.0
2006
2007
2008
Costs and Expenses
The Cost of Sales dropped from 32.3% in 2007 to 31.9% in
2008 due mainly to a better management of manufacturing
costs, lower incidence of losses of products and promotions,
and lower average income tax rate in the Brazilian operations.
Selling expenses, as a percentage of net revenues, were stable
at 33.8% in the fourth quarters of 2008 and 2007. Expenses
increased due to the expansion of the sales force in foreign
operations and the regionalization process of the commercial
area in the Brazilian operations. These expenses were offset
by productivity gains in the provision of services to
customers in Brazil and by the reduction of the unit cost
of the magazine, which is our sales catalogue.
Pro Forma Financial Highlights
Brazil (R$ millions)
Total number of consultants - end of period*
(in thousands)
Product units for resale
(in thousands)
Gross revenues
Net revenues
Gross profit
Gross margin (%)
Selling expenses
Administrative expenses
Management compensation
Other income (expenses). net
Financial income (expenses). net
Operating income
Net income
EBITDA
EBITDA margin (%)
* Number of consultants at the end of sales Cycle 17.
2007
2008
632.4
730.6
265.9
4,115.9
2,926.9
1,987.9
67.9%
922.7
371.5
9.5
(31.3)
9.6
678.0
527.8
759.9
26.0%
299.1
4,642.0
3,405.3
2,332.1
68.5%
1,107.8
394.1
13.9
(3.4)
(11.2)
858.9
628.0
929.6
27.3%
In the operations under consolidation (Argentina, Chile
and Peru), net revenues were R$ 55.6 million in the fourth
quarter of 2008, showing a weighted growth of 34.7% in
local currency (55.7% in Brazilian reais) from the fourth
quarter of 2007. In 2008, these operations show net income
of R$ 164.4 million, representing a weighted growth of 39.6%
in local currency (35.6% in Brazilian reais) from 2007.
EBITDA from these operations broke even again in the
fourth quarter of 2008 at R$ 0.6 million (positive) compared
with R$ 2.9 million (negative) in the fourth quarter of 2007.
In 2008, EBITDA also practically broke even (R$ 1.4 million
negative) with a significant increase in the margin from
-4.2% in 2007 to -0.9%. The increased gross profit from these
operations was used in marketing expenses and increasing
the sales force. There were 90,000 in these operations at the
end of the year, showing a strong increase of 29.6% in relation
to the same period the previous year.
Pro Forma Financial Highlights – Operations under
Consolidation (Argentina, Chile, Peru) (R$ millions)
Total number of consultants – end of period*
(in thousands)
Product units for resale
(in thousands)
Gross revenues
Net revenues
Gross profit
Gross margin (%)
Selling expenses
Administrative expenses
Financial income (expenses). net
Operating income
Net income
EBITDA
EBITDA margin (%)
2007
2008
69.4
90.0
14.2
157.4
121.2
76.3
62.9%
65.6
17.0
(0.1)
(6.2)
(9.7)
(5.1)
-4.2%
17.9
214.7
164.4
101.5
61.8%
85.0
19.6
5.9
(9.0)
(13.3)
(1.4)
-0.9%
In the operations under implementation (Mexico, Venezuela
and Colombia), net revenues were R$ 15.0 million in the
fourth quarter of 2008 compared with R$ 7.5 million in the
same period the previous year. In 2008, net revenues from
these operations were R$ 44.0 million compared with
R$ 21.7 million in 2007. There were 28,200 consultants in
these operations at the end of the year.
a
r
u
t
a
n
t
r
o
p
e
r
l
a
u
n
n
a
56 57
Selling expenses, as a percentage of net revenues, increased
from 31.5% in 2007 to 32.5% in 2008, due to the increase in
marketing expenses in Brazil, as planned and disclosed in our
action plan, in addition to the strong growth of the sales force
in the foreign operations.
Administrative expenses, as a percentage of net revenues,
dropped 210 percentage points from 13.1% in the fourth
quarter of 2007 to 11.0% in the fourth quarter of 2008.
This reduction, influenced mainly by events in the Brazilian
operations, was partially offset by higher expenses with foreign
operations, which is a reflection of the expenses with the
structure established to support the studies and planning for
the United States and a higher provision for profit sharing in 2008.
In the year, administrative expenses, as a percentage of net
revenues, dropped from 12.7% in 2007 to 11.6% in 2008,
basically due to the same factors mentioned above.
EBITDA and Net Income
Consolidated EBITDA totaled R$ 259.6 million in the fourth
quarter of 2008 compared with R$ 199.4 million in the fourth
quarter of 2007, a growth of 30.1%. The EBITDA margin grew
from 21.3% in the fourth quarter of 2007 to 22.7% in the
fourth quarter of 2008. In 2008, EBITDA totaled R$ 859.9
million, up 22.5% from the R$ 702.0 million seen in 2007.
The margin was higher than the minimum we established
as guidance for the three years between 2008 and 2010,
totaling 23.8% in the year
Consolidated EBITDA (R$ millions)
654.5
702.0
859.9
2006
2007
2008
Part of Natura’s risk management policy is to keep its results,
projected for a period of at least six months, as independent as
possible from foreign exchange variations. Our hedging model,
which takes into consideration foreign exchange variations on
the inputs, foreign investments, and balances in other currencies,
has positively influenced net financial income and expenses in
the fourth quarter of 2008 and 2008 as a whole.
Consolidated net income totaled R$ 162.6 million in the
fourth quarter of 2008 compared with R$ 135.6 million in the
fourth quarter of 2007, a growth of 20.0%. The lower growth
rate in net income in relation to EBITDA in the fourth quarter
of 2008 is mainly due to higher income tax expenses, which
resulted from the linearization methodology of the annual
effective rate, which was higher than projected.
In the year, consolidated net income was R$ 542.2 million
compared with R$ 462.3 million in 2007, representing a
growth of 17.3% and a net margin of 15.0% in both years.
The higher income tax expense in 2008 was mainly due
to: 1) non-declaration of interest on capital; 2) increase in
the losses of subsidiaries in relation to income before
income tax; and 3) lower representativeness of the reversal
of the provision for goodwill.
Investments (Property, plant and equipment)
Investments in property, plant and equipment in 2008 totaled
R$ 102.7 million and were mainly in the expansion of the
production capacity and logistics and information technology.
For 2009, the planned investments total R$ 140.0 million.
Pro Forma Results per Operation Block
Since the second quarter of 2007, we have been presenting
the pro forma results in Brazilian reais of the following blocks:
Brazil, operations under consolidation, and operation under
implementation. The profit margin accrued from the exports
from Brazil to foreign operations was deducted from the
Cost of Sales of the respective operations, showing the real
impact of these subsidiaries on the company’s consolidated
result. Accordingly, the pro forma Statement of Income Brazil
shows only total sales in the domestic market.
As from the first quarter of 2008, we began to present the
pro forma results of foreign operations when we started
having results from Latin American (LATAM) operations
and other markets. In the LATAM operations, we highlight
two operation blocks: under consolidation (Argentina, Chile
and Peru); and under implementation (Mexico, Colombia
and Venezuela).
Pro Forma EBITDA per Operation Block (R$ millions)
Brazil
Argentina, Chile and Peru
Mexico, Venezuela and Colombia
France and USA
Foreign exchange effect on the
translation of foreign investments
Total
2007
759.9
(5.1)
(28.0)
(16.5)
(8.3)
702.0
2008
929.6
(1.4)
(37.9)
(42.8)
12.5
859.9
In France and the United States, we had operating losses
(EBITDA) of R$ 16.6 million in the fourth quarter of 2008
compared with R$ 6.6 million in the fourth quarter of 2007,
influenced by the expenses of the analysis and planning
project in the United States and the still negative results
in France. In 2008, these losses amounted R$ 42.8 million
for the same reasons mentioned above.
Pro Forma Financial Highlights - Operations under
Implementation (Mexico, Venezuela, Colombia) (R$ millions)
2008
2007
Total number of consultants - end of period*
(in thousands)
Product units for resale
(in thousands)
Gross revenues
Net revenues
Gross profit
Gross margin (%)
Selling expenses
Administrative expenses
Financial income (expenses). net
Operating income
Net income
EBITDA
EBITDA margin (%)
16.4
28.2
1.8
24.8
21.7
14.3
65.9%
33.3
9.8
(0.2)
(28.6)
(28.0)
(5.1)
-128.8%
5.0
50.4
44.0
26.5
60.3%
50.4
14.7
0.3
(38.8)
(37.9)
(1.4)
-86.2%
Cash flows
The generation of free cash totaled R$ 499.1 million in 2008
compared with R$ 171.3 million in 2007. Internal cash
generation in 2008 amounted to R$ 630.2 million, up 17.3%
from 2007. This total includes R$ 29.7 million of operating
working capital.
For a better understanding of the reduction in the working
capital for 2008, it is necessary to take into consideration the
events that took place in 2007: 1) extraordinary reduction
in accounts receivable of R$ 122.0 million at December 31,
2007, due to the more flexible credit policy adopted for
Christmas sales; and (2) effect of R$ 25.0 million in the
balance of inventories due to lower-than-estimated revenues
for that period.
There were also temporary effects of R$ 24.0 million in taxes
recoverable (net of temporary effects of taxes payable), arising
from the change in the tax substitution system in some
states, in addition to the structural effects of: 1) R$ 15.0
million in taxes payable due to the extension in the period
for the payment of ICMS in the state of São Paulo; 2)
R$ 32.0 million in inventories due to the physical
decentralization and better coverage of Foreign Operations;
and 3) R$ 28.0 million in salaries payable arising from the
change in the variable compensation policy. Including these
effects, working capital evolved in line with the company’s
growth and business strategy.
Investments in property, plant and equipment in 2008 totaled
R$ 102.7 million and were mainly in the expansion of the
production capacity and logistics and information technology.
Investments in property and equipment in 2009 will total
R$ 140.0 million.
Pro Forma Consolidated Cash Flows – (R$ millions)
Net income for the period
2007
462.3
2008 Change %
17.3
542.2
(+) Depreciation and amortization
74.9
88.0
Internal cash flow generation
Operating working capital*
Other assets and liabilities**
537.2
(207.2)
(34.6)
630.2
29.7
(58.1)
17.4
17.3
Operating cash generation
295.4
601.8
103.7
Acquisitions of property.
plant and equipment
(124.1)
(102.7)
171.3
191.4
499.1
Free cash generation***
* Assets – Accounts receivable, inventories and taxes recoverable in the short term.
Liabilities – suppliers, salaries, profit sharing and social charges, tax obligations,
provisions and freight payable.
** Assets – Advances to employees and suppliers, income tax and short-term deferred
social contribution, other credits and long-term receivables. Liabilities – other short-term
and long-term accounts payable and provisions for tax, civil and labor risks.
*** (Internal cash generation) +/- (changes in working capital and long-term
receivables and liabilities). (Acquisitions of property, plant and equipment).
Financial
Statements
Natura Cosméticos S.A.
Financial Statements for the Years
Ended December 31, 2008 and 2007
and Independent Auditors' Report
In compliance with legal and statutory rules, we are submitting
the balance sheets and financial statements for the years ended
December 31, 2008 and December 31, 2007 for your review.
In addition to the information contained in the explanatory
notes, the company management is available to provide any
further clarifications.
Balance Sheets
Statements of Income
Statements of Changes in Shareholders' Equity
Statements of Cash Flows
Statements of Value Added
Notes to the Consolidated Financial Statements
annualreportnatura
58 59
Balance Sheets
As of december 31, 2008 and 2007
(In thousands of Brazilian reais - R$))
ASSETS
CURRENT ASSETS
Cash and banks
Trade accounts receivable
Inventories
Recoverable taxes
Related parties
Deferred income tax and social contribution
Unrealized gains on derivative transactions
Advances to employees and suppliers
Other receivables
Total current assets
NONCURRENT ASSETS
Long-term assets:
Recoverable taxes
Deferred income tax and social contribution
Escrow deposits
Advances to employees and suppliers
Temporary cash investments
Advance for future capital increase
Investments
Property, plant and equipment
Intangible assets
Total noncurrent assets
TOTAL ASSETS
Company
Consolidated
Note
2008
5
6
7
8
10
9.a
22.d
8
9.a
16
5 e 16.g
10
11
12
12
87,513
428,421
60,300
45,942
18,518
43,367
35,393
6,192
34,096
759,742
7,521
17,407
37,187
-
-
45
864,142
40,573
6,300
973,175
1,732,917
2007
(Restated)
105,571
512,094
29,246
2,022
12,456
25,812
-
2,305
11,606
701,112
2,370
16,647
35,119
785
-
25
766,439
27,866
6,548
855,799
1,556,911
2008
350,497
470,401
333,632
122,364
-
77,024
38,062
6,941
64,247
1,463,168
20,823
36,958
41,017
2,071
5,250
-
-
494,008
52,612
652,739
2,115,907
2007
(Restated)
405,392
535,528
251,079
49,368
-
52,327
-
3,569
25,513
1,322,776
22,284
34,318
38,603
4,531
4,848
-
-
474,442
63,817
642,843
1,965,619
LIABILITIES AND SHAREHOLDERS' EQUITY
Company
Consolidated
CURRENT LIABILITIES
Loans and financing
Domestic suppliers
Foreign suppliers
Suppliers - related parties
Salaries, profit sharing and related charges
Taxes payable
Dividends and interest on capital
Accrued freight
Reserve for tax, civil and labor contingencies
Allowance for losses on derivative transactions
Other payables
Sundry accruals
Total current liabilities
NONCURRENT LIABILITIES
Loans and financing
Reserve for tax, civil and labor contingencies
Allowance for investment losses
Other payables
Total noncurrent liabilities
MINORITY INTEREST
SHAREHOLDERS' EQUITY
Capital
Capital reserves
Profit reserves
Valuation adjustments to shareholders' equity
Treasury shares
Accumulated losses
Total shareholders' equity
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
The accompanying notes are an integral part of these financial statements.
Note
2008
14
10
15
10 e 19.b
16
22.d
14
16
11
19.a
19.e
19.f
19.c
5,293
51,066
148
250,555
55,062
64,361
311,854
24,963
15,791
-
23,364
-
802,457
177,972
33,592
701
7,020
219,285
-
391,423
140,470
174,489
5,161
(368)
-
711,175
1,732,917
2007
(Restated)
120,785
43,092
148
145,037
33,776
85,141
237,898
17,231
-
3,813
19,456
835
707,212
116,847
33,270
10,060
5,401
165,578
-
390,618
154,403
170,318
(8,403)
(2,701)
(20,114)
684,121
1,556,911
2008
190,550
182,617
3,571
-
130,706
177,802
311,854
25,560
15,791
-
29,085
-
1,067,536
289,480
51,144
-
9,324
349,948
1
391,423
140,470
161,736
5,161
(368)
-
698,422
2,115,907
2007
(Restated)
288,959
173,574
2,076
-
87,068
118,511
237,898
18,044
13,420
6,351
21,436
888
968,225
259,992
51,021
-
7,342
318,355
1
390,618
154,403
165,235
(8,403)
(2,701)
(20,114)
679,038
1,965,619
Statements os Income
For the years ended December 31, 2008 and 2007
(In thousands of Brazilian reais - R$, except earnings per share)
GROSS SALES
To domestic market
To foreign market
Other sales
GROSS OPERATING REVENUE
Taxes on sales, returns and rebates
NET OPERATING REVENUE
Cost of sales
GROSS PROFIT
OPERATING (EXPENSES) INCOME
Selling
Administrative and general
Employee profit sharing
Management compensation
Equity in subsidiaries
Other operating income (expenses), net
INCOME FROM OPERATIONS BEFORE FINANCIAL (EXPENSES) INCOME
Financial expenses
Financial income
INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTION
Income tax and social contribution
NET INCOME
EARNINGS PER SHARE - R$
The accompanying notes are an integral part of these financial statements.
Note
2008
4,575,865
-
1
4,575,866
(744,927)
Company
2007
(Restated)
4,083,301
-
56
4,083,357
(914,744)
3,830,939
(1,597,855)
3,168,613
(1,232,280)
Consolidated
2008
2007
(Restated)
4,635,665
275,274
1,294
4,912,233
(1,294,214)
3,618,019
(1,154,669)
4,111,505
188,884
1,225
4,301,614
(1,228,915)
3,072,699
(992,253)
2,233,084
1,936,333
2,463,350
2,080,446
(1,017,117)
(485,748)
(20,332)
(10,087)
(9,125)
30,738
721,413
(84,111)
66,343
703,645
(177,864)
(847,329)
(469,632)
(10,541)
(6,414)
(11,775)
(4,081)
586,561
(31,876)
27,595
582,280
(122,210)
(1,259,273)
(404,529)
(56,927)
(13,853)
-
28,353
(1,033,195)
(383,745)
(28,664)
(9,539)
-
3,973
757,121
(119,149)
109,707
747,679
(229,568)
629,276
(58,279)
51,039
622,036
(156,627)
525,781
460,070
518,111
465,409
1,2254
1,0730
1,2075
1,0855
18
11
24
23
23
9.b
annualreportnatura
60 61
Statements os Changes in Shareholders’ Equity (Company)
For the years ended December 31, 2008 and 2007
(In thousands of Brazilian reais - R$, except dividends per share)
Statements os Changes in Shareholders’ Equity (Company)
continuation
Note
Capital
Share
premium
Capital reserves
Tax incentive
reserve
Investment
grants
Additional
paid-up
capital
Profit reserves
Legal
Retention
Valuation
adjustments to
shareholders’
equity
Treasury
shares
Accumulated
losses
Total
BALANCES AS OF
DECEMBER 31, 2006 -
AS PER LAW No. 6,404/76
Acquisition of treasury shares
Sale of treasury shares due to
exercise of stock options
Share payment by shareholders
Capital increase through
subscription of shares
Capital increase through
capitalization of profit reserve
Tax incentives
Net income
Allocation of net income:
Dividends - R$0,8767
per outstanding share
Interest on capital - R$0,0778
per outstanding share
Profit retention reserve
BALANCES AS OF
DECEMBER 31, 2007 -
AS PER LAW No. 6,404/76
Adjustments for the first-time
adoption of Law No. 11,638/07
and Provisional Act No. 449/08:
233,862
-
120,770
-
14,587
-
19.c
-
-
(13,273)
92
19.a
19.f
-
-
19.b
19.b
19.h
2,817
153,939
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,791
-
-
-
-
390,618
107,589
17,378
Adjustment to fair value
of derivatives:
Prior years
Year ended December 31, 2007
Cumulative adjustment from
translation of financial statements
of foreign subsidiaries-
Year ended December 31, 2007
Stock options plans - grant
of stock options:
Prior years
Year ended December 31, 2007
Stock options plans - exercise
of stock options--
Year ended December 31, 2007
3
3
3
3
3
3
-
-
-
-
-
-
-
-
-
-
-
9,145
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,193
3,405
(9,145)
18,650
-
263,830
-
-
-
-
-
-
-
-
-
-
-
-
-
(153,939)
-
-
-
-
41,777
18,650
151,668
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(8,403)
-
-
-
(724)
(22,701)
20,724
-
-
- 650,975
(22,701)
-
-
-
-
7,451
92
2,817
-
-
-
-
- 456,914
-
2,791
456,914
- (375,890) (375,890)
-
-
(39,247)
(41,777)
(39,247)
-
(2,701)
- 683,202
-
-
-
-
-
-
(18)
1,900
(18)
1,900
8,403
(9,193)
(3,405)
-
-
-
-
-
Note
Capital
Share
premium
Capital reserves
Tax incentive
reserve
Investment
grants
Equity in subsidiaries:
Prior years
Year ended December 31, 2007
Deferred income tax and
social contribution::
Prior years
Year ended December 31, 2007
3
3
3
3
-
-
-
-
-
-
-
-
-
-
-
-
Additional
paid-up
capital
12,845
3,993
-
-
Profit reserves
Legal
Retention
Valuation
adjustments to
shareholders’
equity
Treasury
shares
Accumulated
losses
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(14,066)
(3,096)
(1,221)
897
7
(646)
7
(646)
390,618
116,734
17,378
20,291
18,650
151,668
(8,403)
(2,701)
(20,114)
684,121
BALANCES AS OF DECEMBER 31,
2007 - ADJUSTED AS PER LAW
No. 11,638/07 AND
PROVISIONAL ACT No. 449/08
Absorption of accumulated losses
with profit retention reserve
Acquisition of treasury shares
Sale of treasury shares due to
exercise of stock options
Capital increase through
subscription of shares
Cumulative adjustment from
translation of financial statements
of foreign subsidiaries
Changes in stock option plans:
Grant of stock options
Exercise of stock options
Net income
Allocation of net income:
11
20
20
Recognition of tax incentive reserve
Interim dividends - R$0,4382
per outstanding share
Proposed dividends - R$0,5934
per outstanding share
Proposed interest on capital -
R$0,1138 per outstanding share
Profit retention reserve
19.b
19.b
19.b
19.f
BALANCES AS OF DECEMBER
31, 2008 - AS PER LAW
No. 11,638/07 AND
PROVISIONAL ACT No. 449/08
19.c
-
-
-
-
-
(20,837)
19.a
805
-
-
-
-
-
-
-
-
1,816
-
-
-
-
-
-
-
-
-
5,088
(5,956)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(20,114)
-
-
-
-
-
-
-
-
-
-
-
24,285
-
-
-
-
13,564
-
(21,124)
20,114
-
-
(21,124)
23,457
-
-
-
-
-
2,620
805
13,564
-
-
-
-
-
-
-
-
-
-
-
-
- 525,781
5,088
-
525,781
-
(1,816)
-
- (188,000) (188,000)
- (254,215) (254,215)
-
-
(57,465)
(24,285)
(57,465)
-
-
-
-
5,956
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
391,423
101,853
19,194
19,423
18,650
155,839
5,161
(368)
- 711,175
The accompanying notes are an integral part of these financial statements.
annualreportnatura
62 63
Statements of Cash Flows
For the years ended December 31, 2008 and 2007
(In thousands of Brazilian reais - R$)
Statements of Value Added
For the years ended December 31, 2008 and 2007
(In thousands of Brazilian reais - R$)
Note
2008
Company
2007
(Restated)
Consolidated
2008
2007
(Restated))
CASH FLOW FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
Inflation and exchange rate fluctuations, except those related
to tax, civil and labor contingencies
Allowance for losses on swap and forward contracts
Reserve for tax, civil and labor contingencies, including adjustment for inflation
Deferred income tax and social contribution
Proceeds from sale and disposal of property, plant and equipment
and intangible assets
Equity in subsidiaries
Interest on loans
Expenses on stock options plans
Other adjustments to income, including allowance for inventory losses
Minority interest
11
22
16
9.a
11
(Increase) decrease in assets:
Current assets:
Trade accounts receivable
Inventories
Other receivables
Noncurrent assets (long-term assets)::
Escrow deposits
Recoverable taxes
Other receivables
Increase (decrease) in liabilities:
Current liabilities:
Suppliers
Salaries, profit sharing and related charges, net
Taxes payable, net
Payment of contingencies
Other payables
Noncurrent liabilities-
Other payables
12
11
22
19.b
19.a
19.c
Net cash provided by operating activities
CASH FLOW FROM INVESTING ACTIVITIES
Additions to property, plant and equipment and intangible assets
Investments
Dividends received from subsidiaries
Other investments
Net cash used in investing activities
CASH FLOW FROM FINANCING ACTIVITIES
Repayments of loans and financing - principal
Repayments of loans and financing - interest
Funding - loans and financing
Payments of swap and forward contracts
Payment of dividends and interest on capital
Capital increasel
Acquisition of treasury shares
Sale of treasury shares due to exercise of stock options
Share payment by shareholders
Net cash used in financing activities
Effects of exchange rate changes on cash and banks
INCREASE (DECREASE) IN CASH AND BANKS
Cash and banks at beginning of year
Cash and banks at end of year
INCREASE (DECREASE) IN CASH AND BANKS
SUPPLEMENTAL CASH FLOWS INFORMATION
Income tax and social contribution paid
525,781
460,070
518,111
465,409
9,564
32,544
(35,393)
17,539
(17,843)
7,589
9,125
5,178
2,055
3,320
-
559,459
83,673
(31,054)
(28,537)
(16,821)
(5,151)
764
2,874
113,477
17,399
(44,540)
(1,012)
11,647
1,621
98,592
660,925
(25,428)
(139,646)
34,800
-
(130,274)
(380,800)
(2,950)
283,485
(4,847)
(425,898)
805
(21,124)
2,620
-
(548,709)
-
(18,058)
105,571
87,513
(18,058)
8,523
(5,829)
22,935
(18,770)
(3,900)
819
3,412
3,027
3,405
998
-
474,690
(155,913)
(1,585)
(8,482)
(67,792)
(380)
1,443
(232,709)
(22,149)
22
51,176
(424)
4,037
2,181
34,843
276,824
(16,402)
(64,495)
-
-
(80,897)
(393,964)
(1,824)
596,596
(21,133)
(391,052)
2,817
(22,701)
7,451
92
(223,718)
-
(27,791)
133,362
105,571
(27,791)
89,608
46,217
(94,014)
5,633
(33,582)
7,729
-
30,363
5,088
1,506
-
576,659
65,127
(84,059)
(26,110)
(15,276)
1,461
2,465
(56,392)
9,029
35,364
59,291
(1,094)
17,784
2,532
122,906
643,173
76,347
(15,909)
25,281
(4,776)
(22,938)
8,190
-
23,586
7,399
9,630
(3)
572,216
(164,112)
(28,107)
(5,527)
(68,144)
(1,303)
878
(266,315)
(31,141)
(1,141)
64,049
(442)
(551)
2,994
33,768
339,669
(102,678)
-
-
-
(124,131)
-
-
630
(102,678)
(123,501)
(556,421)
(18,053)
429,392
9,376
(425,898)
805
(21,124)
2,620
-
(579,303)
(16,087)
(570,267)
(14,241)
913,537
(21,790)
(391,052)
2,817
(22,701)
7,451
92
(96,154)
10,222
(54,895)
130,236
405,392
350,497
(54,895)
275,156
405,392
130,236
179,044
122,010
232,708
156,527
REVENUES
Sales of products and services
Allowance for doubtful accounts - reversal (recognition)
Nonoperating
INPUTS PURCHASED FROM THIRD PARTIES
Cost of sales and services
Materials, electric power, outside services and other
GROSS VALUE ADDED
RETENTIONS
Depreciation and amortization
VALUE ADDED GENERATED BY THE COMPANY
VALUE ADDED RECEIVED IN TRANSFER
Equity in subsidiaries
Financial income - includes inflation and exchange rate changes
Controladora
Consolidado
Note
2008
4,504,925
4,569,267
(64,159)
(183)
(3,004,808)
(1,786,227)
(1,218,581)
2007
(Restated)
4,022,979
4,075,403
(53,109)
685
(2,525,201)
(1,431,092)
(1,094,109)
2008
4,827,346
4,897,396
(67,482)
(2,568)
(2,609,142)
(1,543,018)
(1,066,124)
2007
(Restated)
4,237,900
4,291,770
(54,382)
512
(2,329,712)
(1,362,574)
(967,138)
1,500,117
1,497,778
2,218,204
1,908,188
12
11
(9,564)
(9,564)
(8,523)
(8,523)
(87,972)
(87,972)
(74,916)
(74,916)
1,490,553
1,489,255
2,130,232
1,833,272
57,218
(9,125)
66,343
13,920
(11,775)
25,695
109,582
-
109,582
51,039
-
51,039
TOTAL VALUE ADDED TO DISTRIBUTE
1,547,771
1,503,175
2,239,814
1,884,311
DISTRIBUTION OF VALUE ADDED
Employees
Taxes and contributions
Financial expenses and rentals
Dividends
Interest on capital
Retained earnings (*)
(*) Unrealized profit on subsidiaries has been eliminated.
Supplemental statement of value added information
(1,547,771) 100% (1,503,175)
(141,485)
11%
(877,065)
49%
(27,711)
6%
(375,890)
29%
(39,247)
4%
(41,777)
2%
(167,807)
(764,649)
(91,350)
(442,215)
(57,465)
(24,285)
100% (2,239,814) 100% (1,884,311) 100%
(390,264) 21%
25%
(948,253) 50%
46%
4%
(83,539)
6%
(375,890) 20%
20%
2%
(39,247)
3%
3%
(47,118)
1%
(556,371)
9%
58% (1,028,763)
(136,569)
2%
(442,215)
25%
(57,465)
3%
(18,431)
3%
Of the amounts recorded under caption "Taxes and contributions" in2008 and 2007, the amounts of R$ 407,250 and R$ 506,085, respectively, refer
to State VA Tunder the taxpayers' substitution regime (ICMS-ST) levied on the estimated profit margin defined by the State Finance Secretariats
obtained from sales made by Natura beauty consultants to final consumers
For the analysis of this tax impact on the statement of value added, these amounts should be deducted from those recorded under captions "Sales
of products and services" and "Taxes and contributions", since sales revenues do not include the estimated profit attributable to Natura beauty con-
sultants on the sale of products, in the amounts of R$ 2,023,795 and R$ 1,722.090 in 2008 and 2007, respectively, considering an estimated profit
margin of 30%.
The accompanying notes are an integral part of these financial statements. .
The accompanying notes are an integral part of these financial statements.
annualreportnatura
64 65
Notes To The Consolidated Financial Statements
For The Years Ended December 31, 2008 And 2007
(Amounts in thousands of Brazilian reais - R$, unless otherwise stated)
1. OPERATIONS
Natura Cosméticos S.A. (the “Company”) and its subsidiaries are en-
gaged in the development, production, distribution and sale, substan-
tially through direct sales by Natura beauty consultants, of cosmetics,
fragrances in general and personal hygiene products. The Company also
holds equity interests in other companies in Brazil and abroad.
The Extraordinary Shareholders’ Meeting held on March 31, 2008 ap-
proved the transfer to the Company of the negative shareholders’ eq-
uity of the subsidiary Nova Flora Participações Ltda. based on an
independent appraisers’ report. This transfer did not change the oper-
ations described in the previous paragraph.
The negative shareholders’ equity of the subsidiary Nova Flora Partic-
ipações Ltda. transferred to the Company was R$10,059 as of De-
cember 31, 2007, and is composed as follows:
cordance with Corporate Law, including the changes introduced by Law
No. 11,638/07 and Provisional Act No. 449/08, as described in note 3.
The preparation of financial statements requires Management to make
estimates and assumptions to report certain assets, liabilities and other
transactions, such as reserve for tax, civil and labor contingencies, al-
lowances for losses on receivables and inventories, and realization of
deferred income tax and social contribution, which represent Com-
pany’s and its subsidiaries’ Management’s best estimates. Actual results
could differ from those estimates.
Significant accounting practices applied are as follows:
a) Cash and banks
Include cash, bank deposits and highly liquid temporary investments,
stated at cost plus income earned through the balance sheet dates,
which does not exceed their fair or realizable value.
ASSETS
LIABILITIES
CURRENT ASSETS
Cash and banks
Deferred income tax
and social contribution
Total current assets
CURRENT LIABILITIES
Domestic suppliers
18
Reserve for civil contingencies 13,421
833
Other payables
Total current liabilities
14,272
27
4,563
4,590
NONCURRENT LIABILITIES
Allowance for investment losses 352
Advance for future
capital increase
25
Total noncurrent liabilities
377
SHAREHOLDERS’ DEFICIT
Capital
Accumulated losses
3.695
(13,754)
Total shareholders’ deficit
(10,059)
TOTAL ASSETS
4,590
TOTAL LIABILITIES
4,590
In recording adjustments resulting from the transfer of the negative
shareholders’ equity, balances and transactions between the merged
company and the Company have been eliminated, and investment and
shareholders’ deficit have been considered as required by Brazilian ac-
counting practices.
Additionally, on March 31, 2008, concurrently with the transfer, the
Company’s shareholders decided to approve two capital increases in
the subsidiary Nova Flora Participações Ltda. in the total amount of
R$16,735, represented by 16,735 new shares with par value of R$1.00
each, which were fully paid up in local currency. Therefore, capital was
increased from R$3,695 to R$20,430.
2. PRESENTATION OF FINANCIAL STATEMENTS AND SIGNIFICANT
ACCOUNTING PRACTICES
The financial statements have been prepared and are being presented in
conformity with Brazilian accounting practices and the standards estab-
lished by the Brazilian Securities and Exchange Commission (CVM), in ac-
b) Financial instruments
(i) Classification and measurement
The Company and its subsidiaries classify their financial assets under
the following categories: (i) financial assets measured at fair value
through profit or loss; and (ii) financial assets and liabilities held-to-
maturity. The classification depends on the purpose for which the fi-
nancial assets and liabilities were acquired. The Company’s and its
subsidiaries’ Management classifies their financial assets and liabilities
when they are contracted.
Financial assets measured at fair value through profit or loss
This category includes only derivatives financial instruments, classified
as held- -for-trading. The assets under this category are classified in cur-
rent assets, and gains and losses arising from fluctuations in fair value are
recorded under the captions “Financial income” or “Financial expense”.
Financial assets and liabilities held-to-maturity
In the case of the Company and its subsidiaries, these comprise basically
temporary cash investments and bank loans and financing. They are
measured at cost, plus income earned according to contractual terms
and conditions, in the case of temporary cash investments, and at amor-
tized cost using the effective interest rate method, in the case of bank
loans and financing, and are recorded in the statement of income on the
accrual basis.
(ii) Derivatives
Are, initially, recognized at cost on the date they are contracted and
subsequently remeasured at fair value, and changes in fair value are
recorded in the statement of income.
Derivatives are usually measured by the Company’s treasury area based
on the information on each contracted transaction and the related mar-
ket information at the balance sheet dates, such as interest rate and
foreign exchange coupon. When applicable, such information is com-
pared with the positions reported by the trading desks of each involved
financial institution.
Even though the Company and its subsidiaries use derivatives for hedg-
ing purposes, it does not apply hedge accounting.
The fair value of derivatives is disclosed in note 22.
c) Trade accounts receivable and doubtful accounts
Stated at their present value, less the allowance for doubtful accounts,
which is recognized based on an analysis of risks on collection of re-
ceivables, in an amount considered sufficient to cover possible losses, as
described in note 6.
As receivables are usually settled within a period of less than 30 days,
the carrying amounts represent substantially their fair values at the bal-
ance sheet date.
d) Inventories
Stated at the average cost of acquisition or production, adjusted to mar-
ket value and potential losses, when applicable. Details are disclosed in
note 7.
e) Investments
Investments in subsidiaries are accounted for under the equity method,
as shown in note 11.
Exchange gains or losses on the translation of financial statements of for-
eign subsidiaries, for equity accounting and consolidation of financial
statements purposes, are allocated to the caption “Valuation adjustments
to shareholders’ equity”, in shareholders’ equity, and reclassified to the
statement of income upon the sale of the investment, if applicable.
f) Foreign currency transactions
Are translated to Brazilian reais at the exchange rates prevailing on the
transaction dates. Balance sheet figures are translated at the exchange
rates prevailing at the balance sheet dates. Exchange gains and losses
arising from the settlement of these transactions and the translation of
monetary assets and liabilities denominated in foreign currencies are
recognized in the statement of income.
g) Property, plant and equipment and intangible assets
Recorded at acquisition and/or construction cost, adjusted for inflation
through December 31, 1995, plus interest capitalized during the con-
struction period, when applicable. Depreciation and amortization are
calculated under the straight-line method, considering the rates shown
in note 12
Pursuant to the exemption provided in paragraph 54 of Accounting
Pronouncements Committee Standard (CPC) 13 - First-time Adoption
of Law No. 11,638/07 and Provisional Act No. 449/08, the Company
and its subsidiaries will conduct the first periodic analysis of the eco-
nomic useful lives of the assets, effective January 1, 2009.
Additionally, those rights in tangible assets that are used in the opera-
tions of the Company and its subsidiaries, arising from capital lease
transactions, are recorded as financed purchases, and a fixed asset and
a financing liability are recognized at the start of each transaction, de-
preciated based on the estimated useful lives of the assets. Software li-
censes acquired are capitalized and amortized based on the rates
described in note 12, and expenses related to software maintenance are
recognized as expenses when incurred.
h) Expenses on product research and development
Recognized as expenses when incurred.
i) Deferred charges
Represented by goodwill arising from the merger of shares of Natura
Empreendimentos S.A. into Natura Participações S.A., less the provi-
sion to maintain payment capacity for future dividends, as described in
note 13.
j) Impairment assessment
Property, plant and equipment, intangible assets and other noncurrent
assets are annually tested to identify evidences of impairment, or also
significant events or changes in circumstances that indicate that their
carrying amounts cannot be recovered. When applicable, when there is
a loss, arising from situations where the carrying amount of an asset
exceeds its recoverable amount, defined as the higher of value in use
and net selling price, this loss is recognized in the statement of income.
k) Current and noncurrent liabilities
Stated at known or estimated amounts, plus, when applicable, related
charges and inflation and exchange rate changes incurred through the
balance sheet dates.
l) Income tax and social contribution
Income tax is calculated at the rate of 15%, plus a 10% surtax on an-
nual taxable income exceeding R$240. Social contribution is calculated
at the rate of 9% on taxable income. Deferred income tax and social
contribution recorded in current and noncurrent assets. arise from tem-
porary differences represented by temporarily nondeductible expenses
recorded in income.
Pursuant to CVM Resolution No. 273/98 and CVM Instruction No.
371/02, deferred taxes are recorded at probable realizable values. De-
tails are disclosed in note 9.
m) Loans and financing
Loans are initially recognized at fair value of proceeds received, less the
costs of transaction. They are subsequently carried at amortized cost, i.e.,
plus charges, interest and inflation and exchange rate changes incurred
through the balance sheet dates, as shown in note 14.
n) Reserve for tax, civil and labor contingencies
Adjusted for inflation through the balance sheet dates to cover proba-
ble losses, based on the nature of contingencies and the opinion of the
Company’s and its subsidiaries’ attorneys. For financial statement pres-
entation purposes, these reserves are stated net of related escrow de-
posits. The basis and nature of the reserve for tax, civil and labor
contingencies are described in note 16.
o) Derivative transactions (swaps and forwards)
The nominal values of swap and forward transactions are not recorded
in the balance sheets. Unrealized net gains or losses on these transac-
tions, measured at fair value, are recorded on the accrual basis of ac-
counting, as mentioned in notes 22.b) and 22.d).
p) Financial income and expenses
Represented by interest and inflation and exchange rate changes on
cash investments, escrow deposits, loans and financing, and derivative
transactions consisting of swaps and forwards, as mentioned in note 23.
q) Interest on capital
For corporate and accounting purposes, interest on capital is state as al-
location of income directly in shareholders’ equity.
r) Earnings per share
Calculated based on the number of shares at the balance sheet dates,
excluding treasury shares.
s) Stock option plans
The Company offers to its employees and executives share-based com-
pensation plans, settled with Company’s shares, under which the Com-
pany receives services in return for stock options. The fair value of the
options granted is recognized as an expense in the statement of in-
come during the vesting period, and options are vested after certain
specific conditions are fulfilled. At the balance sheet dates, the Com-
pany’s Management reviews its estimates on the number of options
annualreportnatura
66 67
vested based on the conditions fulfilled and, when applicable, recog-
nizes in the statement of income as a contra entry to shareholders’ eq-
uity the effect arising from the revision of the initial estimates.
t) Results of operations
Income and expenses are recorded on the accrual basis.
Income from tax incentives, received in the form of a monetary asset,
is recognized in the statement of income when received. There are no
established conditions to be met by the Company that might affect the
recognition of income in the statement of income.
3. FIRST-TIME ADOPTION OF THE CHANGES IN BRAZILIAN
ACCOUNTING PRACTICES
The enacted Law No. 11,638/07 and Provisional Act No. 449/08 al-
tered, revoked and added new provisions to the Brazilian Corporate
Law (Law No. 6,404/76), especially with respect to chapter XV. Said
Law and Provisional Act are effective for fiscal years ended on or after
December 31, 2008 and apply to all entities established as corpora-
tions, including public-traded companies and large companies.
These changes were designed primarily to update the Brazilian Cor-
porate Law, so as to enable the convergence of Brazilian accounting
practices with international accounting standards (IFRS) and allow the
regulatory agencies and CVM to issue new accounting standards and
procedures, consistent with such international accounting standards.
Additionally, as a result of the enactment of said Law and Provisional Act,
in 2008 the Accounting Pronouncements Committee (CPC) issued sev-
eral accounting pronouncements mandatory for the closing of the fi-
nancial statements for the year ended December 31, 2008.
The main changes in accounting practices introduced by Law No.
11,638/07 and articles 36 and 37 of Provisional Act No. 449/08 appli-
cable to the Company and its subsidiaries and adopted in the prepara-
tion of the financial statements for the years ended December 31, 2008
and 2007 were as follows:
a) Replacement of the statement of changes in financial position by the
statement of cash flows, prepared in accordance with CPC 03 - State-
ment of Cash Flows. Up to December 31, 2007, the Company pre-
sented this statement as supplemental information.
b) Inclusion of the statement of value added, prepared in accordance
with CPC 09 - Statement of Value Added. Up to December 31, 2007,
the Company presented this statement as supplemental information.
c) Creation of a new account group, “Intangible assets”, which includes
goodwill, for purposes of balance sheet presentation. The Company al-
ready presented the balance of intangible assets classified under this
caption.
d) Requirement for the periodic test for impairment of amounts
recorded in property, plant and equipment, intangible assets and de-
ferred charges to ensure, as regulated by CPC 01 - Impairment of As-
sets (required only for the financial statements for the year ended
December 31, 2008). This change did not generate any impacts to be
recognized in the financial statements for the year ended December
31, 2008.
e) Requirement to record under the caption “Property, plant and equip-
ment” those rights in tangible assets that are maintained or used in the
operations of the Company’s and its subsidiaries’ business, including
those rights received as a result of transactions classified as capital leases,
as regulated by CPC 06 - Leases.
f) Requirement that investments in financial instruments, including deriv-
atives, be accounted for: (i) at fair value or equivalent value for trading se-
curities or securities available for sale; and (ii) at the lower of acquisition
or historical cost, adjusted for contractual interest and other contractual
provisions, and realizable value for other investments, for held-to-
maturity securities, as regulated by CPC 14 - Financial Instruments. How-
ever, this change generated impacts only in the measurement of
derivatives, as temporary cash investments held by the Company and its
subsidiaries are classified as “Held-to-maturity” and thus continued to be
measured at amortized cost, as mentioned in note 22.
g) Profit distributed to debentureholders, employees and management,
even as financial instruments, and employees’ pension funds and health
care plans, which does not qualify as expenses, shall be recorded as ex-
penses, according to their nature. This change also affects the manage-
ment’s and employees’ share-based compensation, as regulated by CPC
10 - Share-based Payment.
h) Discontinuation of the presentation of the caption “Nonoperating in-
come (expenses)” in the statement of income, as regulated by Provi-
sional Act No. 449/08.
i) Elimination of items “c” and “d” of paragraph 1 of article 182 of Law
No. 6,404/76 that permitted recording: (i) the premium received on
issue of debentures; and (ii) donations and government investment
grants directly as capital reserves in shareholders’ equity. Change appli-
cable to the Company only as regards the recognition of tax incentives,
where the Company started to recognize the amounts of such tax in-
centives directly in the statement of income, which are subsequently
allocated to the caption “Tax incentive reserve - Investment grants” in
shareholders’ equity, as regulated by CPC 07 - Government Grants and
Government Assistance.
j) Creation of a new account group, “Valuation adjustments to share-
holders’ equity”, in order to record certain fair value adjustments, mainly
for financial instruments, and certain fair value adjustments related to as-
sets and liabilities as a result of a merger between unrelated parties
that results in the transfer of control. Change applicable to the Com-
pany only as regards the recognition of the effects of exchange rate
changes arising from the translation of financial statements of foreign
subsidiaries for equity accounting and consolidation of financial state-
ments purposes.
Considering the changes introduced by Law No. 11,638/07 and Provi-
sional Act No. 449/08, the effects on the net income for the year ended
December 31, 2007 and prior years, classified as “Accumulated losses”
in shareholders’ equity, previously determined in conformity with the
accounting practices set forth by Law No. 6,404/76, are as follows:
Company
2007
Prior years
Total
As per accounting practice - Law No. 6,404/76` 456,914
Adjustments due to changes in
accounting practices:
Fair value of derivatives
Cumulative adjustment from translation
of financial statements of foreign subsidiaries
Stock option plans - expenses on grant
of stock options
Equity in subsidiaries (*)
Deferred income tax and social contribution
(3,405)
(3,096)
(646)
8,403
1,900
-
456,914
(18)
1,882
-
8,403
(9,193)
(14,066)
7
(12,598)
(17,162)
(639)
Total adjustments, net of taxes
3,156
(23,270)
(20,114)
As per accounting practice - Law No.
11,638/07 and Provisional Act No. 449/08
460,070
(23,270)
436,800
(*) Refer to adjustments, net of taxes, arising from changes in accounting prac-
tices, made based on equity in direct and indirect subsidiaries, related to: (a)
fair value of derivatives (applicable to Indústria e Comércio de Cosméticos
Natura Ltda. and Natura Logística e Serviços Ltda.); (b) stock option plans
(applicable to Indústria e Comércio de Cosméticos Natura Ltda., Natura Logís-
tica e Serviços Ltda., Natura Inovação e Tecnologia de Produtos Ltda. and for-
eign subsidiaries); and (c) capital leases (applicable only to Natura Logística e
Serviços Ltda.).
As per accounting practice -
Law No. 6,404/76
Adjustments due to changes
in accounting practices:
2007
462,255
Consolidated
Prior years Total
-
462,255
2,838
Fair value of derivatives
Cumulative adjustment from translation
of financial statements of foreign subsidiaries
Stock option plans - expenses on grant
(7,399)
of stock options
Capital leases
421
Deferred income tax and social contribution (1,107)
8,403
(675)
2,163
-
8,403
(22.038)
(1,194)
637
(23,270)
-
(29,437)
(773)
(470)
(20,114)
(2)
3,156
(2)
Total adjustments, net of taxes
Minority interest
As per accounting practice -
Law No. 11,638/07 and
Provisional Act No. 449/08
465,409
(23,270)
442,139
4. CONSOLIDATION CRITERIA
The consolidated financial statements have been prepared in accordance with
the consolidation criteria established by Brazilian accounting practices and
CVM instructions and resolutions, and include the financial statements of the
Company and its direct and indirect subsidiaries, as follows:
Ownership interest - %
2007
2008
Direct:
Indústria e Comércio de Cosméticos Natura Ltda.
Natura Cosméticos S.A. - Chile
Natura Cosméticos S.A. - Peru
Natura Cosméticos S.A. - Argentina
Natura Brasil Cosmética Ltda. - Portugal
Nova Flora Participações Ltda.
Natura Inovação e Tecnologia de Produtos Ltda.
Natura Europa SAS
Natura Cosméticos y Servicios de Mexico,
S.A. de C.V.
Natura Cosméticos de Mexico, S.A. de C.V.
Natura Distribuidora de Mexico, S.A. de C.V.
Natura Cosméticos C.A. - Venezuela
Natura Cosméticos Ltda. - Colombia
Natura Cosmetics USA Co.
Flora Medicinal J. Monteiro da Silva Ltda.
Natura Cosméticos España S.L. - Spain
Natura (Brasil) International B.V. - The Netherlands
Indirect ownership:
Natura Logística e Serviços Ltda.
Flora Medicinal J. Monteiro da Silva Ltda.
Ybios S.A. (proportional consolidation - joint control))
Natura Innovation et Technologie de
Produits SAS - França
Natura Brasil Inc. (EUA – Delaware)
Natura International Inc (EUA – NY)
Natura Worlwide Trading Company (Costa Rica)
99.99
99.99
99.94
99.96
98.00
-
99.99
100.00
99.99
99.99
99.99
99.99
99.99
100.00
99.99
100.00
100.00
99.99
-
33.33
99.99
100.00
100.00
100.00
99.99
99.99
99.94
99.94
98.00
99.99
99.99
100.00
99.99
99.99
100.00
99.99
99.99
99.99
-
-
-
99.99
100.00
33.33
-
-
-
-
The consolidated financial statements have been prepared based on
the financial statements as of the same date and consistent with the ac-
counting practices described in note 2. Investments in subsidiaries have
been eliminated in the proportion of the investor’s interest in the share-
holders’ equity and net income of the subsidiaries. Intercompany bal-
ances and transactions and unrealized profits have also been eliminated.
The minority interest in the Company’s subsidiaries is shown separately.
The financial statements of foreign subsidiaries have been translated
into Brazilian reais at the exchange rates in effect on the date of the re-
lated financial statements.
The shareholders’ equity balances as of December 31, 2008 and 2007,
reported by the Company, differ by R$12,753 and R$5,083, respectively,
from those recorded in the consolidated financial statements due to
the elimination of unrealized profits of subsidiaries and the Company.
For the same reason, net income balances as of December 31, 2008 and
2007, reported by the Company, differ by R$7,670 and R$5,339, re-
spectively, from the balances in the consolidated financial statements.
The operations of the direct and indirect subsidiaries are as follows:
a) Indústria e Comércio de Cosméticos Natura Ltda.: engaged princi-
pally in the production and sale of Natura products to Natura Cos-
méticos S.A. - Brazil, Natura Cosméticos S.A. - Chile, Natura
Cosméticos S.A. - Peru, Natura Cosméticos S.A. - Argentina, Natura
Cosméticos Ltda. - Colombia, Natura Europa SAS, Natura Cosméticos
de Mexico, S.A. de C.V. and Natura Cosméticos C.A. - Venezuela, which
amounts are mentioned in note 10.
b) Natura Cosméticos S.A. - Chile, Natura Cosméticos S.A. - Peru,
Natura Cosméticos S.A. - Argentina, Natura Cosméticos C.A. -
Venezuela, Natura Cosméticos Ltda. - Colombia, Natura Cosmetics
USA Co. (in preoperating stage as of December 31, 2008) and Natura
Distribuidora de Mexico, S.A. de C.V.: their activities are an extension
of the activities conducted by the parent company Natura Cosméticos
S.A. - Brazil.
c) Natura Inovação e Tecnologia de Produtos Ltda.: its activities consist of
product and technology development, and market research. It is wholly
owner of Natura Innovation et Technologie de Produits SAS - France, a
research and technology satellite center opened in 2007 in Paris.
d) Natura Europa SAS: engaged in the purchase, sale, import, export
and distribution of cosmetics, fragrances in general and personal hy-
giene products.
e) Natura Cosméticos de Mexico, S.A. de C.V.: engaged in the import
and sale of cosmetics, fragrances in general and personal hygiene prod-
ucts to Natura Distribuidora de Mexico, S.A. de C.V.
f) Natura Cosméticos y Servicios de Mexico, S.A. de C.V.: engaged in the
provision of administrative and logistics services to Natura Cosméticos
de Mexico, S.A. de C.V. and Natura Distribuidora de Mexico, S.A. de C.V.
g) Natura Cosméticos España S.L. - Spain, Natura (Brasil) International B.V.
- The Netherlands, Natura Brasil Inc. (USA - Delaware), Natura Interna-
tional Inc. (USA - New York) and Natura Worldwide Trading Company
(Costa Rica): companies in preoperating stage and their activities will be
an extension of the activities developed by Natura Cosméticos S.A.
h) Flora Medicinal J. Monteiro da Silva Ltda.: previously engaged in the
sale of its own brand of phytotherapic and phytocosmetic products.
Since 2005 this company has been dormant. After the merger of Nova
Flora Participações Ltda. on March 31, 2008, Flora Medicinal J. Monteiro
da Silva Ltda. became a direct subsidiary of Natura Cosméticos S.A.
i) Natura Logística e Serviços Ltda.: engaged in the provision of admin-
istrative and logistics services to Natura Group companies based in
Brazil. See details in note 10.
j) Ybios S.A.: engaged in research, management and development of
projects, products and services in the biotechnology area, and may also
enter into agreements and/or partnerships with universities, founda-
tions, companies, cooperatives, associations and other public and private
entities, provision of services in the biotechnology area and holding of
equity interest in other companies.
annualreportnatura
68 69
k) Natura Innovation et Technologie de Produits SAS - France: prima-
rily engaged in research in the safety and efficacy of active compounds,
skin care and new packaging materials using “in vitro” testing, an alter-
native to testing on animals.
Changes in the allowance for doubtful accounts for the year ended De-
cember 31, 2008 are as follows:
8. RECOVERABLE TAXES
Company
-
8,792
2008
ICMS (State VAT) on purchases of inputs (b) 40,087
ICMS on purchases of fixed assets
2,727
COFINS (tax on revenue) on purchases
of fixed assets
ICMS - ST (a)
PIS (tax on revenue) on purchases
of fixed assets
Taxes - foreign operations
PIS and COFINS (taxes on revenue)
on purchases of inputs
PIS/COFINS and CSLL (social
contribution on net profit) -
withheld at source
IRPJ (corporate income tax)
CSLL (social contribution on net profit)
Other
1,857
-
-
-
-
-
-
53,463
45,942
7,521
Consolidated
2008
80,439
13,118
2007
14,584
18,811
2007
1,037
3,170
-
-
-
-
9,217
8,792
16,193
-
1,955
20,482
3,516
14,418
185
4,214
576
-
-
-
-
2,302
1,691
969
8
4,392 143,187
2,022 122,364
20,823
2,370
1,568
1,069
520
397
71,652
49,368
22,284
Company
Consolidated
2008
19,785
2007
15,347
2008
54,123
2007
49,398
67,728
-
89,316
908
301,624
-
348,004
12,838
5. CASH AND BANKS
Cash and banks
Investments:
Bank certificates of deposit (CDBs)
Investment funds
Current
Noncurrent (note 16.(g) -
tax contingencies)
Company
Balance in
2007
Additions (a)
(34,278)
(69,436)
Reversals
21,772
Write-offs (b)
Balance in
2008
42,495
(39,447)
Consolidated
Balance in
2007
Additions (a)
Reversals
Write-offs (b)
Balance in
2008
(40,024)
(75,170)
25,039
43,691
(46,464)
87,513
105,571
355,747
410,240
(a) Allowance recognized as mentioned in note 2.c).
87,513
105,571
350,497
405,392
(b) Refers to accounts over 180 days past-due written off due to failure to col-
lect.
-
-
5,250
4,848
87,513
105,571
355,747
410,240
7. INVENTORIES
Company
Consolidated
Current
NonCurrent
As of December 31, 2008, interest rate yields for CDBs ranged from
100.0% to 103.1% of the interbank deposit rate (CDI) (100.0% to
102.0% as of December 31, 2007). In the consolidated, their share in the
total investment portfolio as of December 31, 2008 was 100.0% (96.4%
as of December 31, 2007). In the year ended December 31, 2008, the
weighted-average yield of mutual fund investments was 94.8% of CDI
for the year.
CDBs are classified under caption “Cash and banks” because they are
financial assets that can be redeemed immediately without penalty for
early withdrawal.
6. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable
Allowance for doubtful accounts
Company
Consolidated
2008
2007
467,868 546,372
(39,447) (34,278)
2008
2007
516,865 575,552
(40,024)
(46,464)
428,421 512,094
470,401 535,528
Below is the aging of the trade accounts receivable:
Current
Up to 30 days past-due
31 to 60 days past-due
61 to 90 days past-due
91 to 180 days past-due
Company
Consolidated
2008
2007
390,196 496,701
23,182
51,043
7,390
8,437
5,736
4,965
14,134
12,456
2008
2007
434,061 522,409
26,654
56,175
7,390
8,437
4,965
5,736
14,134
12,456
467,868 546,372
516,865 575,552
Finished products
Raw materials and packaging materials
Promotional materials
Work in process
Allowance for inventory losses
2008
2007
59,417 27,713
-
2,677
-
(1,144)
-
3,746
-
(2,863)
2008
2007
254,643 198,890
52,850
84,131
21,257
19,651
7,944
11,098
(35,891) (29,862)
60,300 29,246
333,632
251,079
The increase recorded in the balance of finished products as of De-
cember 31, 2008 is substantially justified by the opening, in 2008, of a
Distribution Center in the city of Canoas, State of Rio Grande do Sul,
which totaled R$18,374 as of that date.
Changes in the allowance for inventory losses for the year ended De-
cember 31, 2008 are as follows:
Company
Balance in
2007
Additions,
líquidas(a)
Write-offs
(b)
Balance in
2008
(1,144)
(1,718)
-
(2,863)
Consolidado
Balance in
2007
Additions,
líquidas(a)
Write-offs
(b)
Balance in
2008
(29,862)
(18,004)
11,975
(35,891)
(a) Refers basically to the recognition of the reserve for discontinuance, expi-
ration and quality losses, according to the actual need to cover expected losses
on the realization of inventories and the policy established by the Company
and its subsidiaries.
(b) Refers to write-offs of products discarded b y the Company and its sub-
sidiaries.
(a) Refers to State VAT under the taxpayers’ substitution regime (ICMS -
ST) credits from the State of Santa Catarina that were challenged in court
and which were deposited in escrow in the period from March to Decem-
ber 2007. In January 2008, the Company entered into an Agreement with the
State Government of Santa Catarina to use a 30% Value-Added Margin
(MVA) to calculate the ICMS - ST on sales made by the Company in
that State.
As a result of the above-mentioned Agreement, a total of R$29,938 de-
posited in escrow up to December 2007 was converted to revenue for the
State. Of this amount, R$11,436 is being refunded to the Company by the
State of Santa Catarina in 24 monthly readjusted installments. This is occur-
ring through offsets against ICMS - ST due beginning as of April 2008.
As a result of the disaster that resulted from flooding in the State of Santa
Catarina, the Company voluntarily decided to suspend offsets in the months
from November 2008 to January 2009 in order to contribute to the
State’s recovery.
For maintaining said Agreement, the Company assumed cer tain commit-
ments whereby the following items agreed to will be applied in transactions
conducted by Natura beauty consultants in Santa Catarina: (i) in the period
from January 1, 2007 to June 30, 2008, a 30% MVA; (ii) starting in October
2008, after approval by the State of Santa Catarina’s tax authorities, a 35%
MVA, calculated based on the study prepared by Fundação Getúlio Vargas -
FGV; and (iii) ICMS paid will be increased by at least 5% in 2008, compared
to 2007, being the Company compliant with this commitment.
On December 10, 2008, the State of Santa Catarina published Decree No.
1,985, which requires use of a 35% MVA, determined based on the survey
conducted by Fundação Getúlio Vargas - FGV, contracted by the Brazilian
Association of Direct Sales Companies (ABEVD), for the period from July
2008 to June 2009. .
(b) The increase recorded as of December 31, 2008 refers mainly to ICMS
- ST which was withheld from the Company and its subsidiary Indústria e
Comércio de Cosméticos Natura Ltda. in transactions with products in-
tended for customers located in States other than the State of São Paulo and
the Federal District.
The Company and its subsidiary have been offsetting 75% of the monthly
credits determined for ICMS, while the remaining portion is kept for offset
within six months after administrative verification by the São Paulo State Fi-
nance Department in accordance with the special regime granted to the
Company and its subsidiary in September 2008.
ICMS - ST credits, which amounted to R$40,087 - Company and R$80,439
- consolidated, as of December 31, 2008, will be regularly offset according
to the system described in the above paragraph.
9. INCOME TAX AND SOCIAL CONTRIBUTION
a) Deferred
Deferred income tax (corporate income tax - IRPJ) and social contri-
bution (social contribution on net profit - CSLL) result from tempo-
rary differences (Company and subsidiaries). These credits are recorded
in current and noncurrent assets, in view of their expected realization.
The amounts are as follows:
Company
Consolidated
2008
2007
2008
2007
431
701
973
Circulante:
Current-
Temporary differences:
Allowance for doubtful accounts (note 6) 13,412 11,655
Allowance for inventory losses (note 7)
389
Non-inclusion of ICMS in the PIS
and COFINS basis (note 15)
Reserve for tax, civil and labor
contingencies (note 16)
Effects of unrealized profits on inventories
of the Company and its subsidiaries
Allowance for losses on swap and forward
contracts (notes 22.b) and 22.d))
Unrealized impacts of lease contracts -
Law No. 11,638/07
-
Provision for ICMS - ST - Paraná (note 15) 5,216
12,661
Other provisions
Deferred income tax and social
contribution
-
1,931
9,839
43,367 25,812
5,369
5,305
1,297
-
-
-
13,412
11,173
11,655
9,382
11,344
4,780
5,369
4,563
7,038
3,087
5,213
2,160
(62)
5,216
18,321
263
1,931
14,506
77,024
52,327
Noncurrent:
Temporary differences:
Reserve for tax, civil and labor
contingencies (note 16)
Other provisions
Deferred income tax and social
contribution
15,993 15,398
1,249
1,414
33,797
3,161
32,858
1,460
17,407 16,647
36,958
34,318
As required by CVM Resolution No. 273/98 and CVM Instruction
No. 371/02, Management estimates, based on projections of future tax-
able income, that the recorded tax credits will be fully realized within
five years.
The amounts recorded in noncurrent assets will be realized
as follows:
2009
2010
2011
2012 and thereafter
2008
-
24,539
8,695
3,724
36,958
2007
21,557
8,768
3,690
303
34,318
annualreportnatura
70 71
b) Current
Reconciliation of income tax and social contribution:
Income before income tax
and social contribution
Income tax and social contribution
at the rate of 34%
Reversal of provision to maintain
payment capacity for future
dividends (note 13)
Technological research and innovation
tax benefit - Law No. 11,196/05 (*)
Tax incentives (donations)
Equity in subsidiaries (note 11)
Unrecognized tax credit on tax losses
generated by foreign subsidiaries
Tax benefit for interest on capital
Transition Tax System (RTT)
(Provisional Act No. 449/08) -
adjustment as per Law No. 11,638/07
Other permanent differences
Income tax and social contribution
expenses
Income tax and social contribution -
current
Income tax and social contribution -
deferred
Controladora
Consolidado
2008
2007
2008
2007
703,645 582,280 747,679 622,036
(239,239)(197,975) (254,211)(211,492)
49,933
49,933
49,933 49,933
14,021
2,516
(3,103)
13,348
2,871
(4,004)
14,021 13,348
4,134
3,495
-
-
-
-
-
13,344
(43,314) (24,095)
- 13,344
(4,774)
(2,782)
-
273
(5,482)
-
5,990 (1,799)
(177,864)(122,210) (229,568)(156,627)
(190,804)(126,110) (254,581)(174,416)
12,940
3,900
25,013 17,789
Effective rate - %
25,3
21,0
30,7
25,2
(*) Refers to the tax benefit established by Law No. 11,196/05, which allows di-
rect deduction of 60% of total expenses on technological research and inno-
vation when calculating taxable income and the social contribution tax base,
following rules established in this Law.
10. RELATED PARTIES
Balances receivable from and payable to related parties are as follows:
Company
2008
2007
Consolidated
2007
2008
Current assets:
Natura Inovação e
Tecnologia de Produtos Ltda. (a)
Natura Logística e Serviços Ltda. (b)
Nova Flora Participações Ltda.
Advance for future capital increase-
Flora Medicinal J. Monteiro
da Silva Ltda. (c)
Current liabilities:
Suppliers:
Indústria e Comércio de
Cosméticos Natura Ltda. (d)
Natura Logística e Serviços Ltda. (e)
Natura Inovação e
Tecnologia de Produtos Ltda. (f)
7,542
10,976
-
5,909
5,714
833
18,518 12,456
45
45
25
25
213,940 110,913
21,153 17,411
15,462 16,713
250,555 145,037
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Dividends and interest on
capital payable
311,854 237,898
311,854 237,898
Transactions with related parties are summarized as follows:
Product sales
2007
2008
Product purchases
2008
2007
Indústria e Comércio
de Cosméticos Natura Ltda.
Natura Cosméticos S.A.
Natura Cosméticos S.A. - Peru
Natura Cosméticos S.A. - Argentina
Natura Cosméticos S.A. - Chile
Natura Cosméticos S.A. - México
Natura Cosméticos Ltda. - Colômbia
Natura Cosméticos C.A. - Venezuela
Natura Europa SAS
Natura Inovação e
Tecnologia de Produtos Ltda.
Natura Logística e Serviços Ltda.
Natura Cosmetics USA.
2,075,190
-
-
-
-
-
-
-
-
1,556,816
-
-
- 1,965,413 1,486,139
19,238
-
23,660
-
11,988
-
10,145
-
1,408
-
1,872
-
1,545
-
32,824
31,477
22,290
14,727
4,645
2,023
1,423
-
-
-
-
-
-
277
81
10
817
4
-
2,075,190
1,556,816 2,075,190 1,556,816
Services rendered
2007
2008
Services engaged
2007
2008
287,.278
-
277,981
-
-
217,255
-
209,806
-
-
45,812
45,775
-
287,278
-
277,981
24,211
287,278
22,400
277,981
164,021
-
164,021
169,181
-
169,181
-
164,021
164,021
-
169,181
169,181
3,606
-
3,606
6,126
-
-
-
3,331
-
3,331
5,728
-
-
-
6,126
5,728
-
3,606
3,606
-
3,559
1,430
1,137
6,126
-
3,331
3,331
-
3,319
1,334
1,075
5,728
Administrative structure: (g)
Natura Logística e Serviços Ltda.
Natura Cosméticos S.A. - Brasil
Indústria e Comércio de
Cosméticos Natura Ltda.
Natura Inovação e Tecnologia
de Produtos Ltda.
Product and technology research
and development: (h)
Natura Inovação e Tecnologia
de Produtos Ltda.
Natura Cosméticos S.A. - Brasil
Research and “in vitro” testing: (i)
Natura Innovation et Technologie
de Produits SAS - França
Natura Inovação e Tecnologia
de Produtos Ltda.
Lease of properties and common
charges: (j)
Indústria e Comércio
de Cosméticos Natura Ltda.
Natura Logística e Serviços Ltda.
Natura Inovação e Tecnologia
de Produtos Ltda.
Natura Cosméticos S.A. - Brasil
Total services rendered
and engaged
2,536,221
2,013,037
2,536,221 2,013,037
(a) Refers to advances granted for provision of product and technology
development and market research services.
(b) Refers to advances granted for provision of logistics and general ad-
ministrative services.
(c) Refers to remittances to Flora Medicinal J. Monteiro da Silva Ltda. by Nova Flora Participações Ltda., a company merged into Natura Cosméticos S.A.
on March 31, 2008, as mentioned in note 1.
(d) Payables for the purchase of products.
(e) Payables for services described in item (g).
(f) Payables for services described in item (h).
(g) General administrative and logistics services rendered.
(h) Product and technological development and market research services rendered.
(i) Research and “in vitro” testing services rendered.
(j) Rental of part of the industrial complex located in the municipality of Cajamar (SP) and buildings located in the municipality of Itapecerica da Serra (SP).
11. INVESTMENTS
Investments in subsidiaries
Investments in subsidiaries are as follows:
Indústria e
Comércio de
Cosméticos
Natura Ltda.
526,155
99,99%
Natura
Cosméticos
S.A.-Chile
83,509
99,99%
Natura
Cosméticos
S.A.-Peru
2,532
Natura
Natura
Cosméticos
Cosméticos
S.A.-Argentina C.A.-Venezuela
60,632
99,94% 99,96%
6,654
99,99%
Company
2008
864,142
2007
766,439
Nova Flora
Participações
Ltda.
-
100,00%
Flora
Medicinal
J. Monteiro
da Silva Ltda.
33,503
99,99%
Natura
Inovação e
Tecnologia de
Produtos Ltda.
5,008
Natura
Europa
SAS
34,567
99,99% 100,00%
Natura
Cosméticos
(*) México
87,066
99,99%
Natura Brasil
Cosmética
Ltda.-Portugal
105
98,00%
Natura
Cosméticos
Ltda. EUA
32,755
100,00%
Natura
Cosméticos
Ltda. Colômbia
17,011
99,99%
Natura
Cosméticos
Ltda. Holanda
-
100,00%
Natura
Cosméticos
Ltda. Espanha
Total
- 889,497
-
100,00%
Capital
Ownership interest
Shareholders’ equity
of subsidiaries
Interest in
shareholders’ equity
Net income (loss) for
the year ended
December 31, 2008,
net of translation effects
753,185
15,812
(4,374)
26,077
2,908
753,110
15,810
(4,371)
26,067
2,908
-
-
(700)
27,597
16,783
26,492
(700)
27,594
16,783
26,489
(1)
(1)
(2,289)
3,314
(2,289)
3,314
95,219
(9,519)
(5,392)
(10,726)
(10,343)
-
(348)
6,040 (21,497)
(23,793)
-
(32,850)
(13,697)
Book value of investments: :
Balances as of
December 31, 2008
Equity in subsidiaries
Exchange rate change
and other adjustments
on translation of foreign
investments
Dividends paid
Capital increase
691,999
95,911
-
(34,800)
-
5,835
(9,188)
1,206
(4,567)
14,193
(8,683)
3,552
(7,289)
992
-
18,171
(1,011)
-
-
4,847
-
15,710
105
-
6,540
Balances as of
December 31, 2008
Allowance for losses:
Balances as of
December 31, 2007
Merger of Nova Flora
Participações Ltda.
Allowance for losses
Saldos em 31
de dezembro de 2008
753,110
15,810
(4,372)
26,067
2,908
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
753,110
15,810
(4,372)
26,067
2,908
-
-
-
-
-
-
-
(348)
19,934
12,074
7,660 (17,891)
15,738
(24,349)
-
-
-
-
-
-
3,711
-
18,889
1,027
-
34,073
(348)
27,594
16,783
26,489
(10,059)
-
(348)
(352)
(700)
10,059
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1)
-
-
(1)
526
(27,664)
1,382
(12,717)
3,630
-
20,235
263
-
14,386
(3,273)
3,314
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
51
51
-
-
-
-
- 864,804
- 864,714
-
(26,906)
- 766,439
(9,125)
-
-
13,564
(34,800)
-
9 128,064
9 864,142
-
-
-
-
(10,060)
9,711
(352)
(701)
(700)
27,594
16,783
26,489
(1)
(3,273)
3,314
51
9 863,441
(*)Consolidated information on the following companies:
Natura Cosméticos - México: Natura Cosmeticos y Servicios de Mexico; S.A. de C.V; Natura Cosmeticos de Mexico, S.A. de C.V; Natura Distribuidora de Mexico, S.A. de C.V.
Natura Europa SAS - Natura Innovation et Technologie de Produits SAS - França; Natura Brasil SAS
annualreportnatura
72 73
INTANGIBLE ASSETS
Annual amortization Adjusted for Accumulated
rate - %
inflation cost
amortization
Net book
value
Adjusted for
inflation cost
2007
Accumulated
amortization
Net book
value
2009
2010
2011
2012 and thereafter
12. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
2008
PROPERTY, PLANT AND EQUIPMENT
Vehicles
Leasehold improvements
Machinery and equipment
Furniture and fixtures
IT equipment
Property, plant and equipment in progress
Advances to suppliers
Annual depreciantion Adjusted for Accumulated
depreciation
inflation cost
rate - %
20 a 33
20 a 33
10
10
20
-
-
27,686
9,726
4,963
4,258
5,768
5,473
4,996
62,870
11,317
3,860
1,119
2,178
3,823
-
-
22,297
2008
Company
Net book
value
Adjusted for
inflation cost
2007
Accumulated
depreciation
Net book
value
16,369
5,866
3,844
2,080
1,945
5,473
4,996
40,573
22,716
9,263
4,136
4,011
5,064
-
40
45,230
9,493
2,115
677
1,889
3,190
-
-
17,364
13,223
7,148
3,459
2,122
1,874
-
40
27,866
Company
Softwares
20
12,215
5,915
6,300
10,856
4,308
6,548
Consolidated
2008
2007
PROPERTY, PLANT AND EQUIPMENT
Machinery and equipment
Buildings
Facilities
Land
Molds
Vehicles
IT equipment
Furniture and fixtures
Leasehold improvements (b)
Property, plant and equipment in progress
Advances to suppliers
Other
Annual depreciantion Adjusted for Accumulated
depreciation
inflation cost
rate - %
Net book
value
Adjusted for
inflation cost
Accumulated Net book
depreciation
value
10
4
10 a 33
-
33
20 a 33
20
10
20 a 33
-
-
-
246,849
144,685
97,903
33,662
76,911
45,010
62,674
25,760
25 ,134
45,934
9,564
7,970
822,056
99,192
41,727
50,630
-
56,841
16,744
37,955
10,559
9,917
-
-
4,483
328,048
147,657
102,958
47,273
33,662
20,070
28,266
24,719
15,201
15,217
45,934
9,564
3,487
494,008
221,679
144,685
92,721
33,662
67,269
35,560
53,856
23,187
15,625
9,824
21,263
6,066
725,397
74,967
36,018
42,238
-
40,626
13,315
28,652
8,115
4,173
-
-
2,851
250,955
146,712
108,667
50,483
33,662
26,643
22,245
25,204
15,072
11,452
9,824
21,263
3,215
474,442
Consolidated
2008
INTANGIBLE ASSETS
Annual amortization Adjusted for Accumulated
rate - %
inflation cost
amortization
Net book
value
Adjusted for
inflation cost
Business lease - Natura Europa SAS (a)
Softwares
Trademarks and patents
-
20
10 a 25
6,732
84,669
2,233
93,634
-
39,475
1,547
41,022
6,732
45,194
686
52,612
5,420
82,893
1,967
90,280
2007
Accumulated
amortization
-
25,231
1,232
26,463
Net book
value
5,420
57,662
735
63,817
(a) The business lease generated on the purchase of a commercial location where Natura Europa SAS operates is supported by an appraisal re-
port issued by independent appraisers because it is an intangible, marketable asset that does not suffer any decrease in value over time. The change
in the balance between December 31, 2007 and 2008 is basically due to the effects of exchange rate changes.
(b) Amortization rates consider the property lease agreement terms, which range from three to five years.
The estimated aggregate amortization expense for the following years
is as follows:
Changes in intangible assets
Changes in property, plant and equipment
Balance at beginning of year
Additions:
Leasehold improvements
Machinery and equipment
Property, plant and equipment
in progress/ advances to suppliers
Vehicles
Molds
Facilities
IT equipment
Furniture and fixtures
Other
Total
(-) Write-offs, net
(-) Depreciation
Company
Consolidated
2008
2007
27,866 26,190
2008
2007
474,442 445,546
459
502
1,390
348
2,887
2,607
19,500 28,477
10,215
11,759
-
-
665
284
-
2,984
9,648
-
-
403
648
-
27,451 13,292
19,072 14,739
10,158 21,004
7,950
5,515
8,013
5,389
4,615
2,414
9,740
10,441
23,884 15,421
(6,820)
(3,277)
(6,925)
(7,900)
102,547 110,717
(3,731) (18,384)
(79,250) (63,437)
Amount
14,559
14,559
14,300
2,462
45,880
Balance at beginning of year
Additions:
Business lease - Natura Europa SAS
Softwares
Trademarks and patents
Intangible assets under development
Total
(-) Write-offs, net
(-) Amortization
Balance at end of year
Company
2008
6,548
2007
3,550
Consolidated
2007
2008
63,817 51,389
-
1,544
-
-
1,544
(128)
(1,664)
6,300
-
981
-
3,614
4,595
-
(1,597)
6,548
-
-
7,593 13,414
-
-
- 11,924
7,593 25,338
(8,440)
-
(10,358) (12,910)
52,612 63,817
13. DEFERRED CHARGES
On March 5, 2004, Natura Participações S.A. was merged into the
Company. Natura Participações S.A. had recorded goodwill on the in-
vestment held in the then subsidiary Natura Empreendimentos S.A.,
amounting to R$1,028,041, and a corresponding provision to maintain
payment capacity for future dividends in the same amount. This good-
will arose from the merger of the shares of Natura Empreendimentos
S.A. into Natura Participações S.A. on December 27, 2000. This merger
was approved by the Extraordinary Shareholders’ Meeting held on that
date and amounts are supported by a valuation report issued by inde-
pendent appraisers:
The amounts are as follows:
Goodwill on investments
Provision to maintain payment capacity
for future dividends
Company
2008
2007
318,203 465,066
(318,203)(465,066)
-
-
As the provision to maintain payment capacity for future dividends cov-
ers the full amount, all of the Company’s shareholders will receive tax
benefits related to the amortization of goodwill. Goodwill is being amor-
tized over a seven-year period, starting as of March 2004. Moreover,
R$146,863 was amortized in the year ended December 31, 2008.
annualreportnatura
74 75
The increase recorded in property, plant and equipment in progress is distributed among several projects currently pursued by the Company and its subsidiaries initialed
in 2008, such as enhancement of operating process, improvements of Distribution Centers and facilities renewals, among others.
Balance at end of year
40,573 27,866
494,008 474,442
14. LOANS AND FINANCING
Type
BNDES - EXIM (1)
Company
2007
Consolidated
2007
2008
- 136,962 110,175
2008
-
Maturity
February 2009,
January 2010,
May 2010 and
February 2011
Resolution No. 2,770 (a) 154,384 88,484 154,384 88,484
January 2010
Charges
Interest of 2.57% p.a. + TJLP (b) for 80%
of the financing and interest of 9.76% p.a.
+ exchange rate change (dollar) for 20%
of the financing maturing in February 2009.
Interest of 2.39% p.a. + TJLP (b) for 80% of
debt and interest of 8.44% p.a. + exchange
rate change for 20% of debt maturing in
January 2010 Interest of 2.60% p.a. + TJLP (b)
for 80% of debt and interest of 8.98% p.a. +
exchange rate change for 20% of debt
maturing in May 2010 Interest of 2.43% p.a. +
TJLP (b) for 80% of debt and interest of 8.31%
p.a. + exchange rate change for 20% of debt
maturing in February 2011
Exchange rate change + 2.11 % p.a.
Compror (buyer financing)
Export notes (NCE)
- 118,482
-
-
- 137,677
41,190
January 2008
April 2008
Interest of 102.8% of CDI (c)
Interest of 104% of CDI (c)
- 50,156 51,915
March 2013
TJLP (b) maturing in March 2013
FINEP (Financing Agency
for Studies and Projects)
Agro-industry Credit Note
-
-
- 54,173 48,787
BNDES (Brazilian
Bank for Economic
and Social
Development Fund)
28,881 30,666 39,792 45,543
April and June
2009
April de 2010
and July 2014
Interest of 100.6% of CDI (c) + IOF (d)
and TR (e) + 8.66% p.a. + IOF (d)
Interest of 4.5% p.a. + TJLP (b) +
UMBNDES (f) for maturity in April 2010
For financing maturing in July 2014:
(i) TJLP (b) + interest of 2.8% p.a. for 85%
of financing; (ii) exchange rate change (dollar)
+ interest of 8.54% p.a. for 9% of financing;
and (iii) TJLP (b) + interest of 2.3% p.a.
for 6% of financing.
Guarante
Guarantee of Natura .
Cosméticos S.A.
Guarantee of Indústria e Comércio
de Cosméticos Natura Ltda.
Guarantee of Natura Cosméticos S.A..
Promissory note and guarantee of
Natura Cosméticos S.A.
Guarantee of Natura Cosméticos
S.A. and bank guarantee
Guarantee of Natura .
Cosméticos S.A
Mortgage (g)
Bank guarantee
-
BNDES – FINAME
(Government Agency for
Machinery and Equipment
Financing)
International transaction Peru -
Banco do Brasil -
FAT Fomentar
(Workers Assistance Fund)
-
Capital lease
-
-
-
- 11,126 14,246
September
de 2012
Interest of 4.5% p.a. + TJLP (b)
Chattel mortgage, guarantee of
Natura Cosméticos S.A. and
promissory notes
- 23,049
-
May 2009
Interest of 8.56% p.a.
Bank guarantee
5,890
6,682
February 2014
Interest of 4.4% p.a. + TJLP (b).
Chattel mortgage, guarantee of
Natura Cosméticos S.A. and
promissory notes .
3,880
4,252
Until September
2012
January 2011
Interest of 99.5% to 102.99% of CDI (h)
CETIP h
None
None
FINEP - grant
Total
Current
Noncurrent
-
-
183,265 237,632 480,30 548,951
618
5,293 120,785 190,550 288,959
177,972 116,847 289,480 259,992
(a) Loans and financing for which swap contracts (CDI) were entered into.
(b) TJLP: long-term interest rate.
(c) CDI: interbank deposit rate.
(d) IOF: tax on financial transactions.
(e) TR: managed prime rate.
(f) UMBNDES: Brazilian Bank for Economic and Social Development Fund (BNDES) monetary unit. Local currency financing from the BNDES are collateralized by
the Cajamar unit.
(g) Mortgages: relate to real estate of the Cajamar unit.
(h) DI-CETIP: daily index calculated based on the average DI, disclosed by the Clearinghouse for the Custody and Financial Settlement of Securities (CETIP) - average “DI” rate.
Maturities of noncurrent portions are as follows:
2009
2010
2011
2012
2013
2014
2008
-
225,226
29,837
20,384
10,351
3,682
289,480
2007
100,831
109,583
18,541
17,543
9,754
3,740
259,992
Company
2007
Additions
Reversals
Payments
6,670
-
-
15. TAXES PAYABLE
Company
2008
2007
ICMS (State VAT) Company and ST (b) 108,738 109,959
PIS/COFINS (taxes on revenue)
(injunction) (a)
1,268
IRPJ (corporate income tax)
9,155
CSLL (social contribution on net profit)
3,907
5,269
IRRF (withholding income tax)
PIS/COFINS and CSLL (Law No. 10,833/03) 2,842
127
COFINS
-
Taxes - foreign operations
-
IPI (Federal VAT)
217
ISS (tax on services)
29
PIS
-
Other
2,061
8,439
3,794
3,863
3,696
119
-
-
214
26
-
Consolidated
2007
2008
164,774 109,892
33,365 14,060
17,483 10,478
4,534
5,771
7,335
8,861
4,784
3,821
4,458
3,229
5,313
5,072
2,285
903
983
1,077
947
637
472
-
131,552 132,171
244,993 165,541
(-) Escrow deposits (b)
(67,191) (47,030)
(67,191) (47,030)
Total taxes payable, net of escrow
deposits
64,361 85,141
177,802 118,511
(a) The Company and its subsidiary Indústria e Comércio de Cosméticos
Natura Ltda. are challenging in court the noninclusion of ICMS in the PIS and
COFINS tax bases. In June 2007, the Company and its subsidiary were au-
thorized by the court to pay PIS and COFINS without the inclusion of ICMS
in the tax bases, starting April 2007. The reserve recognized as of December
31, 2008 refers to the unpaid amounts of PIS and COFINS from April 2007 to
September 2008, adjusted for inflation based on the SELIC (Central Bank
overnight rate).
(b) From theses balances, the amount of R$67,191 as of December 31, 2008
(R$47,030 as of December 31, 2007), Company and consolidated, refers to
the ICMS - ST for the State of Paraná, which is being challenged in court, as also
mentioned in note 16.(a) “Contingent liabilities - possible losses”. The Com-
pany has made monthly escrow deposits for the unpaid amounts.
16. RESERVE FOR TAX, CIVIL AND LABOR CONTINGENCIES
The Company and its subsidiaries are parties to certain tax, labor and
civil lawsuits and to tax proceedings at the administrative level. Based on
the opinion and judgments of its internal and outside legal counsel, Man-
agement believes that the reserve for tax, civil and labor contingencies
is sufficient to cover eventual losses. The reserve, net of escrow de-
posits, are as follows:
Tax
Civil
Labor
Current
Noncurent
Company
Consolidated
2008
2007
23,069 23,054
5,429
21,212
4,787
5,102
2008
2007
37,712 40,312
22,300 17,903
6,226
6,923
49,383 33,270
66,935 64,441
15,791
-
33,592 33,270
15,791 13,420
51,144 51,021
Deductibility of CSLL
(Law No. 9,316/96) (c)
Late-payment fines on
federal taxes in
arrears (b)
6,065
Adjustment for inflation of
federal taxes using the
UFIR (IRPJ/CSLL/ILL) (d)
5,001
IPI - tax collection lawsuit (g) 4,423
INSS debt annulment
action (h)
Tax notification -
IRPJ-1990 (j)
Tax notification -
IRPJ and CSLL -
attorneys’ fees (i)
Attorneys’ fees and others
3,862
2,862
2,860
6,607
Total reserve for
tax contingencies
Escrow deposits
Total reserve for tax
contingencies net of
escrow deposits
38,350
(15,296)
-
-
-
-
-
-
16
16
-
(2,348)
-
-
-
-
-
(11)
(2,359)
-
IPI (Federal VAT)
zero rate (a)
31,034
-
-
Late-payment fines on
federal taxes in arrears (b) 7,207
Deductibility of CSLL
(Law No. 9,316/96) (c)
Adjustment for inflation of
federal taxes using the
UFIR (IRPJ/CSLL/ILL) (d) 5,127
6,670
4,792
Tax notification IPI -
attorneys’ fees (e)
IPI credit on purchases
of fixed asset and
consumption material (f) 4,433
IPI - tax collection lawsuit (g) 4,423
INSS debt annulment
action (h)
Tax notification - IRPJ
and CSLL -
attorneys’ fees (i)
Tax notification -
IRPJ-1990 (j)
3,862
2,866
2,862
1,176
(3,024)
-
-
-
-
-
-
-
-
-
-
(4,846)
-
-
-
-
-
Failure to include ICMS
in tax bases for PIS
and COFINS -
attorneys’ fees (k)
Semiannual PIS - Decree
Laws No. 2,445/88 and
No. 2,449/88 (l)
1,836
Attorneys’ fees and other 10,517
Total reserve for tax
contingencies
Escrow deposits
Total reserve for tax
contingencies net
of escrow deposits
87,920
(47,608)
40,312
2,291
10
(33)
-
6
-
(80)
1,192
-
(7,983)
-
1,192
(7,983)
Adjustment
for inflation
2008
337
7,007
786
4,503
76
285
5,077
4,708
251
4,113
181
3,043
87
1,255
2,947
7,867
3,258
39,265
(900) (16,196)
2,358
23,069
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,158
34,192
884
6,243
337
7,007
76
54
5,203
-
289
285
4,722
4,708
251
4,113
94
2,960
181
3,043
185
2,453
134
2,400
1,970
12,843
8,328
89,457
(4,137) (51,745)
4,191 37,712
23,054
16
(2,359)
Consolidated
2007
Additions
Reversals
Payments
Adjustment
for inflation
2008
TAX CONTINGENCIES
The reserve for tax contingencies relates to the following lawsuits:
(a) Refers to IPI tax credits on raw materials and packaging materials purchased
at a zero tax rate or with a tax exemption. The subsidiary Indústria e Comér-
cio de Cosméticos Natura Ltda. filed for and obtained an injunction granting en-
titlement to the credit. A sentence dismissing the injunction and judging the
Company’s request invalid was rendered on September 25, 2006. The Company
annualreportnatura
76 77
filed an appeal for review of the merit and reestablishment of the injunction’s ef-
fects. To suspend payment of the tax, the Company made escrow deposits for the
disputed amount in October 2006. The total amount deposited in escrow, ad-
justed as of December 31, 2008, is R$34,192 (R$31,034 as of December 31, 2007).
(b) Refers to fine levied for late payment of federal taxes. The reserves reversed
in December 2008 are the result of the current understanding of the Superior
Court of Justice (STJ) set forth in Abstract No. 360.
(c) Refers to CSLL that was addressed by a mandate that questions the con-
stitutionality of Law No. 9,316/96, which prohibited the deduction of CSLL from
its own and income tax bases. A portion of this reserve, in the amount of
R$4,962 (R$4,601 as of December 31, 2007), has been deposited in escrow.
(d) Refers to the adjustment for inflation of federal taxes (IRPJ/CSLL/ILL) related
to 1991 using the UFIR (fiscal reference unit), discussed in a mandate. The
amount involved is deposited in escrow.
(e) Refers to attorneys’ fees to defend tax notifications issued against the sub-
sidiary Indústria e Comércio de Cosméticos Natura Ltda. by the Brazilian Fed-
eral Revenue Service in November 2005, which challenges the tax base for IPI
on transactions with related companies. The subsidiary was notified of the lower
court decisions issued by the Second Judgment Panel of the Federal Revenue’s
Regional Office in Ribeirão Preto in June 2006, which unanimously cancelled tax
requirements related to IPI on these transactions. The appeal filed by the Treas-
ury was denied by unanimous vote, which upheld the original decision that can-
celled the tax requirement, on August 15, 2007. Awaiting formalization and
publication of the decision. On December 18, 2007, the subsidiary Indústria e
Comércio de Cosméticos Natura Ltda. was notified of the decision that denied
the appeal related to one of the tax notifications, which was then discontinued.
(f) The subsidiary Indústria e Comércio de Cosméticos Natura Ltda. is chal-
lenging through injunctions the right to an IPI credit on purchases of fixed as-
sets and consumption materials..
(g) Refers to a tax collection lawsuit intended to collect IPI for July 1989, when
wholesale establishments began to be considered equivalent to industrial es-
tablishments under Law No. 7,798/89. The lawsuit is in the 3rd Region Federal
Court (São Paulo) for judgment of the appeal filed by the debtor. The amounts
involved in this tax collection lawsuit are collateralized by a restricted investment
held by the subsidiary Natura Inovação e Tecnologia de Produtos Ltda., in the
amount of R$5,250 as of December 31, 2008 (R$4,848 as of December 31,
2007), which is recorded in a specific account in noncurrent assets.
(h) Refers to social security contribution (INSS) required by tax notifications is-
sued by the National Institute of Social Security as a result of an audit. The
Company, as taxpayer with joint liability for tax payment, is required to pay INSS
on services provided by third parties. These amounts are disputed in a tax debt
annulment action and they are deposited in escrow. The amounts required in
the tax notification cover the period from January 1990 to October 1999. In
2007, the Company reversed the amount of R$1,903, relating to the expiration
of part of the amount involved in the lawsuit for the period from January 1990
to October 1994, according to binding precedent No. 08 of the Federal
Supreme Court (STF).
(i) Refers to attorneys’ fees for defense of tax notifications issued against the
Company by the Brazilian Federal Revenue Service in August 2003, December
2006 and December 2007, which require the payment of income tax and so-
cial contribution (IRPJ and CSLL) related to the deductibility of the yield of the
debentures issued by the Company in 1999, 2001 and 2002. It is attorneys’
opinion that the likelihood of an unfavorable outcome is remote.
(j) Refers to a tax notification issued by the Brazilian Federal Revenue Service
requiring payment of income tax on profit from incentive-based exports made
in base year 1989 at the rate of 18% (Law No. 7,988, of December 29, 1989)
and not 3% as established by article 1 of Decree No. 2,413/88, on which the
Company based its tax payments at that time.
(k) Refers to attorneys’ fees for filing and dealing with the administrative pro-
ceeding that requested a refund of ICMS included in the PIS and COFINS bases
in the period from April 2002 to March 2007. The attorneys have assessed the
risk of loss as remote.
(l) Refers to the offset of PIS paid in the period from 1988 to 1995 against
Federal taxes due in 2003 and 2004 as permitted by Decree Laws No. 2,445/88
and No. 2,449/88. The reversal made by the Company in 2007 in the amount
of R$14,910 is due to the final decision favorable to the Company, rendered in
August 2007. The remaining reserve refers to the subsidiary Indústria e Comér-
cio de Cosméticos Natura Ltda., which is awaiting the examination of pro-
ceedings by the Board of Tax Appeals.
CIVIL CONTINGENCIES
Changes in the reserve for civil contingencies for the year ended December
31, 2008 are as follows:
2007
Additions
Company
Reversals
Payments
5,146
4,044
(5,259)
(848)
-
1,013
-
485
14,821
(11)
-
-
Adjustment
for inflation
1,439
2008
4,522
28
1,041
560 15,855
5,631
19,878
(5,270)
(848)
2,027 21,418
(202)
-
-
-
(4)
(206)
5,429
-
5,429
19,878
(5,270)
(848)
-
-
-
2,023 21,212
15,791
5,421
-
2007
Additions
Consolidated
Reversals
Payments
5,456
4,738
(5,622)
(1,005)
Adjustment
for inflation
1,418
2008
4,985
-
1,013
-
-
28
1,041
15,649
14,421
(14,432)
-
2,304 17,942
21,105
20,172
(20,054)
(1,005)
3,750 23,968
(3,202)
(86)
1,754
-
(134)
(1,668)
Various civil lawsuits (a)
Attorneys’ fees -
environmental
civil lawsuit (d)
Civil lawsuits and
attorneys’ fees - Nova
Flora Participações
Ltda. (b) and (c)
Total reserve for
civil contingencies
Civil lawsuit escrow
deposits
Total reserve for civil
contingencies, net of
escrow deposits
Current
Noncurrent
Various civil lawsuits (a)
Attorneys’ fees -
environmental
civil lawsuit (d)
Civil lawsuits and
attorneys’ fees - Nova
Flora Participações
Ltda. (b) and (c)
Total reserve for
civil contingencies
Civil lawsuit escrow
deposits
Total reserve for civil
contingencies, net of
escrow deposits
Current
Noncurrent
17,903
13,420
4,483
20,086
-
-
(18,300) (1,005)
-
-
-
-
3,616 22,300
- 15,791
6,509
-
(a) As of December 31, 2008, the Company and its subsidiaries were parties
in 1,148 lawsuits and proceedings (1,587 as of December 31, 2007) in the civil
courts, special civil court and PROCON (consumer protection agency), filed by
Natura beauty consultants, consumers, suppliers and former employees, mostly
related to compensation claims.
(b) The Company is a party in civil lawsuits filed by a former shareholder of the
subsidiary Flora Medicinal J. Monteiro da Silva Ltda., which seek amounts and
settlement of liabilities allegedly owed as a result of the former shareholder’s
withdrawal. In November 2007, the Court of Justice of Rio de Janeiro judged
the appeals filed against the decision issued by the lower court, setting the
amount of the liabilities. The decision issued by the Court of Justice of Rio de
Janeiro was challenged in a motion for clarification denied in January 2008, when
the Company filed a special appeal.
(c) Beginning March 31, 2008 and after the merger of Nova Flora Participações
Ltda., the Company became liable for the civil lawsuits of the former subsidiary.
The Company is a party in other three civil lawsuits filed by a former share-
holder of Flora Medicinal J. Monteiro da Silva Ltda., the nature and likelihood of
a favorable outcome for which are described below:
• Lawsuit for arbitration of capital reimbursement: lawsuit in which the former
shareholder alleges being entitled to amounts resulting from his withdrawal
from the Company. In January 2008, the former shareholder filed with the Su-
perior Court of Justice a special appeal against the decision issued by the Court
of Justice of Rio de Janeiro, which upheld the lower court’s decision and denied
the former shareholder’s claim. The amounts involved cannot be reliably meas-
ured. The attorneys are of the opinion that the likelihood of an unfavorable
outcome is remote.
• Lawsuit for collection of business plan: lawsuit in which the former share-
holder alleges being entitled to receivables resulting from his withdrawal from
the Company. The court expert’s work started in March 2008. The São Paulo
Court District is responsible for this lawsuit. The amounts involved cannot be
reliably measured. The attorneys are of the opinion that the likelihood of an
unfavorable outcome is remote.
• Lawsuit for payment allocation: refers to ICMS credits deposited by the for-
mer shareholder on account of tax payment in installment as agreed to by Flora
Medicinal J. Monteiro da Silva Ltda. Judgment by the Superior Court of Justice
of the bill of review filed by the former shareholder against the decision that re-
jected his special appeal has been awaited since September 2007. The Court
of Justice of Rio de Janeiro overruled the lower court’s decision and denied
the claim made by the former shareholder. The attorneys are of the opinion that
an unfavorable outcome is possible.
(d) Refers to attorneys’ fees for the defense of the Company’s interests in the
public lawsuit filed by the Federal Public Prosecution Office of the State of Acre
against the Company and other institutions for alleged access to the traditional
knowledge associated to the asset denominated “murumuru” (“Astrocaryum
murumuru Mart”.) .
LABOR CONTINGENCIES
As of December 31, 2008, the Company and its subsidiaries are parties
to 685 labor lawsuits filed by former employees and third parties (588
as of December 31, 2007) claiming the payment of severance amounts,
salary premiums, overtime and other amounts due, as a result of joint
liability. Reserves are periodically reviewed to reflect the best current es-
timate based on the progress of lawsuits and history of losses on labor
claims.
Changes in the reserve for labor contingencies for the year ended De-
cember 31, 2008 are as follows:
Total reserve for labor
contingencies
Escrow deposits for
labor lawsuits
Total reserve for labor
contingencies, net
of escrow deposits
2007
Additions
Company
Reversals
Payments
Adjustment
for inflation
2008
5,604
148
(712)
(54)
1,454
6,440
(817)
(521)
-
-
- (1,338)
4,787
(373)
(712)
(54)
1,454
5,102
2007
Additions
Consolidated
Reversals
Payments
Adjustment
for inflation
2008
Total reserve for labor
contingencies
7,323
152
(767)
(54)
1,904 8,558
Escrow deposits for
labor lawsuits
(1,097)
(538)
-
-
- (1,635)
Total reserve for labor
contingencies, net
of escrow deposits
6,226
(386)
(767)
(54)
1,904
6,923
Escrow deposits
Escrow deposits, which represent the Company’s and its subsidiaries’
restricted assets, relate to amounts deposited before the courts until lit-
igation is resolved. Balances of escrow deposits for which there are no
recognized reserve for contingencies totaled R$37,187 - Company and
R$41,017 - consolidated as of December 31, 2008 (R$35,119 and
R$38,603, respectively, as of December 31, 2007) and the same are
classified in caption “Escrow deposits” in noncurrent assets.
Contingent liabilities - possible losses
The Company and its subsidiaries are parties to tax, civil and labor law-
suits, for which no reserve for losses has been recognized, as the risk
of loss is regarded as possible by Management and its internal and out-
side legal counsel. These tax liabilities are as follows:
Tax
Declaratory Action - ICMS -
ST of State of Paraná (a)
Declaratory Action - ICMS -
ST of State of Santa Catarina (c)
Offset of 1/3 of COFINS -
Law No. 9,718/98 (b)
INSS debt annulment action (c)
Tax notification - transfer pricing on
loan agreements with foreign
related company (d)
Tax debt notification - GFIP (e)
Tax notification - ICMS - ST (f)
Request for offset of taxes of the same
type - IRPJ (corporate income tax)
and IRRF (withholding income tax) (g)
Tax notification - IRPJ and CSLL -
debentures (h)
Other
Civil
Labor
Company
2008
2007
Consolidated
2007
2008
14,670 10,715
14,670 10,715
-
9,965
-
9,965
4,713
4,235
4,466
3,976
4,713
4,235
4,466
3,976
1,127
825
703
1,047
718
593
1,127
825
703
1,047
718
593
490
450
490
450
-
11,949
19,360
2,602
58,072 34,532
-
11,949
21,943
4,797
60,655 36,727
6,077
5,666
34,044 30,927
97,782 71,536
18,351 18,283
51,647 46,115
130,653 101,125
(a) Lawsuit filed by the Company challenging the changes in ICMS - ST calcu-
lation basis introduced by Paraná Decree No. 7,018/06. The total discussed in
the lawsuit, related to the period from January 2007 to December 2008, is fully
deposited in escrow, as mentioned in note 15.
(b) Law No. 9,718/98 increased the COFINS rate from 2% to 3%, and allowed
this 1% difference to be offset in 1999 against the social contribution payable
in the same year. However, in 1999 the Company and its subsidiaries filed a
mandate and were granted an injunction suspending the payment of the tax
credit (1% rate difference) and to pay COFINS based on Supplementary Law
No. 70/91, prevailing at that time. In December 2000, considering former un-
favorable court decisions, the Company and its subsidiaries enrolled in the tax
debt refinancing program (REFIS), for payment in installments of the debt re-
lated to the COFINS not paid in the period. With the payment of the tax, the
Company and its subsidiaries gained the right to offset 1% of COFINS against
social contribution, which was made in the first half of 2001. However, the Brazil-
ian Federal Revenue Service understands that the period for offset was re-
stricted to base year 1999. On September 11, 2006, the Company was notified
that the offsets made were not approved, and timely filed the applicable appeal.
This proceeding is awaiting ruling at the lower administrative court.
(c) Lawsuit filed by the Company seeking the annulment of the tax demanded
by the INSS through a tax notification issued for purposes of collecting the so-
cial security contribution on the allowance for vehicle maintenance paid to sales
promoters. The amounts are discussed in the tax debt annulment action and are
deposited in escrow. The amounts required in the tax notification cover the pe-
riod from January 1995 to October 1999.
(d) Refers to a tax notification whereby the Brazilian Federal Revenue Service
is demanding the payment of IRPJ and CSLL on the difference of interest on
loan agreements with a foreign related party. On July 12, 2004, an administra-
tive defense was filed and subsequently dismissed. In June 2008, the Company
filed an appeal against the unfavorable decision with the Board of Tax Appeals,
which is awaiting ruling by this judgment body.
(e) Demand of fine for failure to complete the GFIP (FGTS Payment and So-
cial Security Information Form), an accessory social security obligation, with in-
dependent contractors’ social security contributions and indemnities. The
Company is discussing this collection at the administrative level.
(f) Tax collection notice for ICMS - ST, demanded by the State of Goiás, due to
alleged underpayment by the Company. The Company has filed its defense at
the administrative level and is awaiting judgment.
annualreportnatura
78 79
(g) Refers to the nonapproval of the offset of IRPJ credits related to the fourth
quarter of 1999 against IRRF debts for the second quarter of 2000. The Com-
pany filed its defense at the administrative level, for which a partially favorable
judgment has been rendered. On July 12, 2006, an annulment action was filed,
and an escrow deposit was made, to challenge collection of the balance of off-
set not approved by the Brazilian Federal Revenue Service.
(h) Tax notification issued against the Company in August 2003 whereby the
Brazilian Federal Revenue Service is requiring the income tax and social con-
tribution due on the yield of the debentures issued by the Company in base pe-
riod 1999.
Contingent assets
The Company and its subsidiaries have the following significant contin-
gent assets:
a) The Company and its subsidiary Indústria e Comércio de Cosméti-
cos Natura Ltda. are challenging in court the constitutionality and legality
of the increase in the tax basis for the PIS and COFINS established by
Law No. 9,718/98. The amounts involved in the lawsuits, adjusted for in-
flation through December 31, 2008, total R$19,170 (R$18,111 as of
December 31, 2007). The lawsuits are awaiting judgment. The attorneys’
opinion is that the likelihood of a favorable outcome is probable.
b) The Company and its subsidiaries Indústria e Comércio de Cos-
méticos Natura Ltda., Natura Inovação e Tecnologia de Produtos Ltda.
and Natura Logística e Serviços Ltda. are requesting at the administra-
tive level the refund of the ICMS included in the PIS and COFINS basis
and paid in the period from April 2002 to March 2007. The amounts in-
volved, adjusted for inflation through December 31, 2008, total
R$112,534 (R$103,025 as of December 31, 2007). The attorneys’ opin-
ion is that the likelihood of a favorable outcome is probable.
As a final and unappealable decision has not been rendered, the Com-
pany and its subsidiaries have not recorded the contingent assets, as es-
tablished by CVM Resolution No. 489/05.
17. MANAGEMENT AND EMPLOYEE PROFIT SHARING
The Company and its subsidiaries pay profit sharing to their employees
and officers, tied to the achievement of operational targets and specific
objectives, established and approved at the beginning of each year. As
of December 31, 2008, the following amounts were recorded as profit
sharing: R$25,539 (R$12,556 as of December 31, 2007) and R$64,158
(R$35,827 as of December 31, 2007), Company and consolidated, re-
spectively, under the caption “Salaries, profit sharing and related
charges”, as a contra entry to “Employee profit sharing” and “Manage-
ment compensation” in the statement of income for these years. .
18. MANAGEMENT COMPENSATION
a) The total compensation of the Board of Directors and Officers of the
Company is as follows: :
2008
Stock option grants
Compensation
Variable
Stock option
balance (quantity)
Fixed
(a) Total
(b)
Average
exercise price
(c)
Board of Directors
Officerss
Total
3,968
2,636 1,332
3,263 2,856
6,119
5,899 4,188 10,087
-
391,827
391,827
-
19,58
2007
Stock option grant
Compensation
Variable
Stock option
balance (quantity)
Average
exercise price
(c)
-
21,57
Board of Directors
Officers
Total
Fixed
2,498 (1,049)
3,598 1,367
(a) Total
1,449
4,965
6,096
318
6,414
(b)
-
532,654
532,654
b) The compensation of the Executives of the Company and its sub-
sidiaries is as follows:
2008
Stock option grant
Compensation
Variable
Stock option
balance (quantity)
Fixed
(a) Total
(b)
Average
exercise price
(c)
Executives
7,563
4,012 11,575
717,656
16,89
2007
Stock option grant
Compensation
Variable
Stock option
balance (quantity)
Fixed
(a) Total
(b)
Average
exercise price
(c)
Executives
14,873
4,034 18,907
2,702,650
16,78
(a)Refers to the profit sharing recorded in the statement of income for the
years, The amounts include any additions and/or reversals to the provision
recorded in the previous year in view of the final assessment of the targets es-
tablished for the Board Members, Officers and Executives.
(b) Refers to the balance of unexercised vested and unvested options as of the
balance sheet date.
(c) Refers to the weighted-average exercise price of the option at the time of
the stock option plans, adjusted for inflation based on the Extended Consumer
Price Index (IPC-A) through the balance sheet date.
19. SHAREHOLDERS’ EQUITY
a) Capital
As of December 31, 2007, the Company’s capital was R$390,618. On
March 7, 2008, 100,000 common shares without par value were sub-
scribed for R$3.30 (R$330). On December 31, 2008, 55,698 common
shares without par value were subscribed for an average price of
R$8.52 (R$475). As a result, capital increased from R$390,618, corre-
sponding to 428,929,051 subscribed and paid-up common shares, as of
December 31, 2007, to R$391,423, corresponding to 429,084,749 sub-
scribed and paid-up common shares. Authorized capital of 12,381,074
common shares remained unchanged.
b) Dividend and interest on capital payment policy
Each year, the shareholders are entitled to a mandatory minimum
dividend of 30% of net income, considering principally the following
adjustments:
(cid:129) Increase in the amounts arising from the reversal, in the year, of pre-
viously recognized reserves for contingencies.
(cid:129) Decrease in the amounts intended for the recognition, in the year, of
the legal reserve and reserve for contingencies.
The bylaws allow the Company to prepare semiannual and interim bal-
ance sheets and, based on these balance sheets, authorize the payment
of interim dividends upon approval by the Board of Directors.
On August 10, 2007, the Company paid dividends and interest on cap-
ital in the amounts of R$138,138 and R$39,247, respectively, relating to
income for the first quarter of 2007, as approved by the Board of Di-
rectors on July 25, 2007, and, on April 8, 2008, the Company paid divi-
dends and interest on capital in the amount of R$237,752, relating to
the remaining balance for 2007, as approved at the Annual Sharehold-
ers’ Meeting held on March 31, 2008, totaling R$375,890.
On August 12, 2008, the Company paid dividends in the amount of
R$188,000, relating to income for the first half of 2008, as approved by
the Board of Directors on July 23, 2008, subject to approval at the An-
nual Shareholders’ Meeting that will appreciate the financial statements
for the year ended December 31, 2008.
In addition, on February 18, 2009, the Board of Directors appreciated a
proposal to be submitted to the Annual Shareholders’ Meeting to be held
on March 31, 2009, for the payment of dividends and interest on capital
- gross, related to income for 2008, in the total amounts of R$254,215
and R$57,465, respectively, which, together with the R$188,000 paid in
August 2008, correspond to 95.4% of net income for 2008.
Dividends were calculated as follows:
Company
Net income for the year (*)
Tax incentive reserve - investment grant
Calculation basis for minimum dividends
Mandatory minimum dividends
Annual minimum dividend
Proposed dividends
Interest on capital
IRRF on interest on capital
Total dividends and interest on capital,
net of IRRF
Amount exceeding the mandatory
minimum dividend
Dividends per share - R$
Interest on capital per share - net - R$
Total dividends and interest on capital
per share - net - R$
2008
2007
525,781 456,914
(1,816)
-
523,965 456,914
30%
157,190 137,074
442,215 375,890
39,247
57,465
(5,887)
(8,620)
30%
491,060 409,250
333,870 272,176
0,8767
1,0316
0,0778
0,1138
1,1454
0,9545
(*) In 2007, calculated pursuant to accounting practices set forth by Law
No. 6,404/76.
c) Treasury shares
As of December 31, 2008, the common shares held in treasury, which
have been used in the exercise of options related to stock option plans
for purchase or subscription of shares, totaled 20,955 (161,303 as of
December 31, 2007), at an average unit price of R$17.5426 (R$13.6705
as of December 31, 2007). The decrease in the number of treasury
shares in comparison to December 2007 is explained by the 801,338
options exercised under the stock option plans. .
d) Share premium
Refers to the premium generated on the issuance of 3,299 common
shares resulting from the capitalization of debentures in the amount of
R$100,000, which was carried out on March 2, 2004.
e) Legal reserve
Since the balance of the legal reserve plus the capital reserves provided
for by article 182, paragraph 1, of Law No. 6,404/76 exceeded 30% of
capital, the Company, pursuant to the provisions of article 193 of said
law, decided not to recognize a legal reserve on net income earned in
2006, 2007 and 2008.
f) Profit retention reserve
As of December 31, 2008, the profit retention reserve was recognized
pursuant to article 196 of Law No. 6,404/76, for use in future invest-
ments, in the amount of R$24,285. The retention related to 2008 is
based on the capital budget that will be submitted for approval at the
Annual Shareholders’ Meeting to be held on March 23, 2009.
As prescribed by article 199 of Law No. 6,404/76, the balance of profit
reserves, except for the reserve for contingencies and unrealized profit
reserve, cannot exceed capital. Therefore, at the Extraordinary Share-
holders’ Meeting held on April 2, 2007, the capitalization in the amount
of R$153,939 was approved, referring to the profit reserves recognized
in the years ended December 31, 2004 and 2005, which were fully uti-
lized for investments in property, plant and equipment and working cap-
ital during 2005 and 2006.
20. STOCK OPTION PLANS
Once a year the Board of Directors meets for the purpose of naming
the directors and managers who will receive the options and the total
number to be distributed, in compliance with the terms of the plan.
The plans have a four-year time span for exercising the options, and the
exercise rights are 50% at the end of the third year and 50% at the end
of the fourth year. The maximum term for exercising the options is two
years after the end of the fourth eligibility year.
The changes in the number of outstanding stock options and their re-
lated weighted-average prices in the year are as follows:
Average
exercise price
per share - R$
15.46
19.33
16.77
18.33
As of January 1
Granted
Cancelled
Exercised
As of December 31
19.24
2008
Options
(thousands)
5,476
1,800
(1,077)
(1,466)
4,733
2007
Average
exercise price
per share - R$
9.89
23.64
19.64
21.66
Options
(thousands)
6,701
1,305
(297)
(2,253)
15.46
5,456
Of the 4,733,000 outstanding options as of December 31, 2008
(5,456,000 options in 2007), 1,276,000 (1,815,000 in 2007) are
exercisable.
The options exercised in 2008 resulted in the issuance of 1,466,000
shares (2,253,000 shares in 2007), generating an impact on sharehold-
ers’ equity of R$5,956 (2,253,000 shares in 2007, generating an impact
on shareholders’ equity of R$9,145), Company.
The expense related to the fair value of options granted, recognized in the
statement of income for the years ended December 31, 2008 and 2007
according to the elapsed vesting period, was R$2,055 and R$3,405, re-
spectively, Company, and R$5,088 and R$7,399, respectively, consolidated.
The outstanding stock options at the end of the year have the follow-
ing vesting dates and exercise prices:
annualreportnatura
80 81
As of December 31, 2008:
Outstanding options
Exercisable options
Gran date
Exercise
price - R$
Outstanding
options
Remaining
contract life
(in years)
Exercise
price - R$
Exercisable
options
Exercise
price - R$
3.47
April 10, 2003
April 10, 2004
8.54
March 16, 2005 18.33
March 29, 2006 27.31
25.76
April 24, 2007
19.01
April 22, 2008
203,772
764,606
615,049
731,485
979,940
1,437,866
4,732,718
0.28
1.28
2.21
3.24
4.32
5.31
3.47
8.54
18.33
27.31
25.76
19.01
203,772
764,606
307,525
-
-
-
1,275,903
3.47
8.54
18.33
-
-
-
As of December 31, 2007:
Outstanding options
Exercisable options
Gran date
Exercise
price - R$
Outstanding
options
Remaining
contract life
(in years)
Exercise
price - R$
Exercisable
options
Exercise
price - R$
5.85
April 10, 2002
3.28
April 10, 2003
April 10, 2003
8.06
March 16, 2005 17.31
March 29, 2006 25.79
24.33
April 24, 2007
238,940
1,016,810
1,117,810
831,670
981,660
1,269,955
5,456,845
0.28
1.28
2.28
3.21
4.23
5.32
5.85
3.28
8.06
17.31
25.79
24.33
238,940
1,016,810
558,905
-
-
-
1,814,655
5.85
3.28
8.06
-
-
-
The weighted-average fair value of the options granted during the year
ended December 31, 2008, calculated based on the binomial pricing
model, was R$6.57 (R$9.73 in 2007) per option. The significant data in-
cluded in the model were: weighted-average price of each share of
R$18.66 (R$24.60 in 2007) on grant date, exercise price as presented
above, volatility of 43.22% (42.82% in 2007), dividend yield of 4.27%
(3.70% in 2007), an expected option life of three to four years, ac-
cording to each case, and a risk-free annual interest rate of 10.98%
(11.64% in 2007).
As of December 31, 2008, the market price of each Company share
was R$18.99 (R$17.00 in 2007).
21. PENSION PLAN
On August 1, 2004, the Company implemented a supplementary de-
fined contribution pension plan for all employees of the Company and
its subsidiaries in Brazil. Under the terms of this plan, the cost is shared
between the employer and the employees, so that the Company’s
share is equivalent to 60% of the employee’s contribution, according
to a contribution scale based on salary ranges from 1% to 5% of the
employee’s compensation. The plan is managed by Brasilprev Seguros
e Previdência S.A. The contributions made by the Company and its
subsidiaries totaled R$3,076 in the year ended December 31, 2008
(R$3,808 in 2007).
22. FINANCIAL INSTRUMENTS
a) General conditions
The Company and its subsidiaries enter into transactions involving fi-
nancial instruments, all of which are recorded in balance sheet accounts,
for the purpose of reducing their exposure to currency and interest
rate risks, as well as maintaining their investment capacity and growth
strategy. These transactions include financial investments, loans, financing
and derivative instruments.
Risks and the financial instruments are managed through the definition
of policies and strategies and implementation of control systems, de-
fined by the Company’s Finance Committee and Board of Directors,
which establish foreign exchange exposure limits, allocate funds in fi-
nancial institutions. The compliance of the treasury area’s positions in fi-
nancial instruments, including derivatives, in relation to these policies, is
presented and assessed on a monthly basis by the Finance Committee
and subsequently submitted to the analysis of the Audit Committee,
the Executive Committee and the Board of Directors.
The treasury area’s procedures defined by the current policy include
monthly projection and assessment of the Company’s and its sub-
sidiaries’ consolidated foreign exchange exposure, on which Manage-
ment’s decision-making is based.
Even though the Company and its subsidiaries use derivatives for hedg-
ing purposes, it does not apply hedge accounting.
Cash investments
Cash investments reflect market conditions at the balance sheet dates.
The “Cash Investment Policy” set forth by the Company’s Management
chooses the financial institutions with which contracts may be entered
into, in addition to establishing limits regarding percentages in the allo-
cation of funds and absolute amounts to be invested in each of them.
Loans and financing
Loans and financing are recorded based on the contractual interest
rates of each transaction, as shown in note 14.
Almost in their entirety, 97.6% on December 30, 2008 and 96.3% on
December 30, 2007, foreign-currency denominated loans and financing
have been hedged against foreign exchange fluctuations since their re-
lated contracts were entered into.
Policies related to derivative financial instruments
1) Foreign exchange risks
As a result of the various types of foreign-currency financial obligations
assumed by the Company and its subsidiaries, the Company imple-
mented a “Foreign Currency Hedging Policy”, setting forth exposure
levels pegged to these risks. The amounts in foreign currency of the bal-
ances receivable and payable of commitments already made and
recorded in the financial statements arising from the operations of the
Company and its subsidiaries, as well as future cash flows, with an av-
erage term of six months, not yet recorded in the balance sheet, aris-
ing from: (i) purchases of production inputs; (ii) imports of machinery
and equipment; and (iii) contributions to the result of each subsidiary
abroad in their respective currencies, are taken into account. The de-
rivative transactions are solely aimed at mitigating foreign exchange risks
associated to positions in the balance sheet plus anticipated cash flows
in foreign currency.
The Company and its subsidiaries enter into derivative transactions
called swap and NDFs (Non-Deliverable Forwards) to hedge against
foreign exchange risks.
2) Interest rate risks
The policy adopted by the Company’s and its subsidiaries’ Management
regarding their interest rate exposure is to maintain the indices used to
adjust their interest rates payable and receivable pegged to floating
rates. Cash investments and loans and financing, except those adjusted
by the long-term interest rate (TJLP), are adjusted by the interbank de-
posit rate (CDI) at floating rates.
(5) Total exposure: as of December 31, 2008 and 2007, the Company’s receivable
exposure to foreign currency amounts to R$43,616 and R$41,221, respectively.
The Company and its subsidiaries contract derivatives called swaps in
order to mitigate the risks of loan and financing transactions entered
into with an adjustment index other than the floating rate CDI.
The Company and its subsidiaries have no derivative financial instru-
ments for speculative purposes.
b) Foreign exchange exposure
As of December 31, 2008 and 2007, the main account groups denom-
inated in foreign currency are as follows:
Assets:
Trade accounts receivable (1)
Derivative instruments (2)
Total assets
Liabilities::
Loans and financing (3)
Trade accounts payable (4)
Total liabilities
Total exposure (5)
Consolidated
2007
2008
2.887
236.432
629
154.916
239.319
155.545
(192.092) (112.248)
(2.076)
(3.571)
(195.663) (114.324)
43.616
41.221
(1) Trade accounts receivable: reflect the balances receivable related to the
Company’s exports, not considering its foreign subsidiaries.
(2) Derivative instruments: outstanding swap and forward contracts, shown
below, with maturities between January 2009 and February 2011, were en-
tered into with the banks Alfa (3%), Banco do Brasil (31%), ABN AMRO Real
(65%) and UBS Pactual (1%) and are broken down as follows:
Consolidated
Adjusted
contracted
amount
Balance
receivable
(payable)
Type of transaction
2008
2007
2008
2007
“Financial swaps (2.1)
“Financial forwards (2.1)
“Operating forwards (2.2)
173,359 108,233
-
14,022
49,051 46,683
37,695 (6,244)
-
(112)
(107)
479
236,432 154,916
38,062 (6,351)
Balances receivable (payable) refer to the net adjustment receivable or payable,
calculated at fair value, as of December 31, 2008 and 2007, of the outstand-
ing derivatives entered into by the Company and its subsidiaries, in force in the
related periods.
(2.1) In order to hedge against the financial exposures generated by foreign- -
currency denominated loans and financing, the Company and its subsidiaries
have been entering into swap and forward contracts aimed at mitigating the for-
eign exchange risks to which these loans and financing are subject. Swap trans-
actions consist of the swap of the foreign exchange fluctuation for an
adjustment based on a percentage of the floating rate CDI. Forward transac-
tions set a future exchange parity between the real and the foreign currency,
based on the parity on contract date, adjusted by a given fixed interest rate.
2.2) Forward transactions are contracted to hedge against the so-called oper-
ating foreign exchange exposures, related to future cash flows.
(3) Loans and financing: refer to the balances payable of loans and financing de-
nominated in foreign currency. As of December 31, 2008, of R$192,092,
R$154,384 is denominated in yens (Yen$5,807,729) and R$37,708 in U.S. dol-
lars (US$16,136,000).
(4) Trade accounts payable: refer to the balances payable in foreign currency
owed to suppliers.
c) Interest rate exposure
As of December 31, 2008 and 2007, the Company’s receivable
(payable) exposure to interest rates is as follows::
Cash investments pegged to the CDI (1)
Loans and financing pegged to the CDI (2)
Currency to CDI swaps and forwards (3)
TR to CDI swaps (4)
Net CDI exposure (5)
Consolidated
2007
360,841
(204,135)
(108,115)
(23,402)
25,189
2008
301,624
(28,310)
(187,529)
(25,827)
59,958
Loans and financing pegged to the TJLP (6)
(206,833)
(204,898)
(1) Cash investments: reflect the balances invested in bank certificates of deposit
(CDBs) at floating rates. 3.6% of the balance as of December 31, 2007 was in-
vested in investment funds.
(2) Loans and financing: balances of transactions entered into with the financial
market directly pegged to floating rate CDI.
(3) Currency swaps and forwards: balance of loan and financing transactions de-
nominated in foreign currency with the related derivative transactions, as shown
in item b)(2)(2.1).
(4) TR swaps: the Company and its subsidiaries have entered into swap trans-
actions aimed at hedging against the exposure of liabilities pegged to the fluc-
tuation of TR (managed prime rate) related to the amount of R$28,310 that
account for part of the contracts of the credit facility called Agro-industry Credit
Note. As of December 31, 2008, as shown in note 14, the Company has
R$54,173 in Agro-industry Credit Notes.
Outstanding TR swap contracts, with maturities in June and July 2009,
were entered into with Banco Bradesco and are broken down
as follows:
Consolidated
Adjusted
contracted
amount
Balance
receivable
(payable)
Type of transaction
2008
2007
2008
2007
“TR financial swaps
25,827 23,402
(378)
(231)
The balances payable refer to the net adjustment payable, calculated at
fair value, as of December 31, 2008 and 2007, of the outstanding de-
rivatives entered into by the Company and its subsidiaries in force in the
respective periods,
(5) Net CDI exposure: as of December 31, 2008 and 2007, the Company has
receivable exposures in relation to the floating rate CDI in the amounts of
R$59,958 and R$25,189, respectively.
(6) Loans and financing pegged to the TJLP: reflect the balances of loans and fi-
nancing transactions contracted with the BNDES, FINEP, FINAME and FAT Fo-
mentar, as stated in note 14.
Except for the TJLP, the Company’s receivable and payable exposures
are pegged to the same floating interest rate, with no mismatch.
The Company’s Management considers the exposure risk to the TJLP
as low. The amounts involved are R$206,833 and R$204,898 as of De-
cember 31, 2008 and 2007, respectively.
The net balances receivable and payable arising from currency and for-
eign exchange swap and interest rate forward transactions are recorded
under the captions “Unrealized gains on derivative transactions” and
annualreportnatura
82 83
“Allowance for losses on derivative transactions”, respectively, in current
assets and current liabilities.
Financial derivative transactions entered into by the Company and its
subsidiaries do not require guarantee margins.
Description
Notional value
(reference)
2007
2008
Fair value
2008
2007
d) Fair values
Cash investments
The amounts of cash investments recorded in the financial statements
are similar to their realizable values, as transactions are carried out using
floating interest rates and have immediate liquidity.
Loans and financing
The amounts of loans and financing recorded in the financial statements,
except for those pegged to TJLP, account for most of the liabilities, as
they are pegged to a floating interest rate, in this case, the fluctuation
of CDI.
The amounts of financing pegged to the TJLP are similar to the liabili-
ties recorded in the financial statements because the TJLP has a corre-
lation with the CDI and is a floating rate.
Derivatives
Gains and losses on swap and forward derivative transactions out-
standing as of December 31, 2008 and 2007, considering their carrying
amounts and fair values, are as follows:
Gains (losses) on swap and forward
transactions
Carrying
amount
Fair
value
2008
Carrying
amount
2007
Fair
value
Consolidated
Financial swaps
TR financial swaps
Financial forwards
Operating forwards
51,669 38,073
(378)
(264)
(52)
(112)
649
479
(8,170)
(40)
-
(304)
(6,013)
(231)
-
(107)
52,002 38,062
(8,514)
(6,351)
As mentioned in notes 2.b)(ii) and 2.o), derivatives are now meas-
ured at fair values, and the balance of unrealized gains as of Decem-
ber 31, 2008, in the amount of R$38,062, differs materially from the
balance of gains earned through that date, in the amount of R$52,002,
as measured based on the yield curve. Considering that financial
swaps consist basically of currency hedges, the notional values of
which are equal to the values of financial liabilities indexed to foreign
currencies, and the fact that the Company’s Management intends to
hold both the debt instruments and derivative instruments to their
maturity dates, the difference presented is classified as temporary, until
the final maturity of the transactions, and no financial losses resulting
therefrom are expected.
At the end of each year, the Company and its subsidiaries consult the
financial institutions through which the derivative instruments were
entered into and adjust their respective values based on the current
market conditions of the derivative financial instruments.
e) Breakdown of derivative transactions
(1) Derivatives
The information on derivatives entered into by the Company and its
subsidiaries as of December 31, 2008 and 2007, arising from foreign-
currency denominated loans and financing, is as follows:
Swap contracts-
Asset position:
20,356
Long position-dollar 22,899 21,802 19,675
90,993
90,000 90,000 141,284
Long position-yen
22,903
22,313 23,313 25,608
TR
135,212 135,115 186,567 134,252
Liability position-
Floating CDI rate: :
22,662
Long position-dollar 22,899 21,802 16,517
94,700
Long position-yen 90,000 90,000 106,370
22,313 23,313 25,986
23,134
135,212 135,115 148,873 140,496
TR
Forward contracts-
Long position-dollar 13,594
- 14,006
Liability position-
Fixed rate
13,594
- 14,118
-
-
Accumulated effect up to
12/31/08 at fair value
Amount
receivable
(received)
Amount
payable
(paid)
3,159
34,914
-
38,073
-
-
(378)
(378)
-
-
-
-
-
-
-
-
-
-
-
(112)
(2) Operating derivatives
The information on operating derivatives as of December 31, 2008 and
2007 entered into by the Company and its subsidiaries to hedge against
the exposure arising from future cash flows is as follows:
Description
Forward contracts:
Notional value
(reference)
2007
2008
Fair value
2008
2007
Accumulated effect up to
12/31/08 at fair value
Amount
receivable
(received)
Amount
payable
(paid)
Long position-dollar 45,314 21,554 46,687
2,292
Long position-euro
1,777 25,562
47,091 47,116 48,979
25,522
21,256
46,778
14
465
479
Liability position-
Fixed rate: :
Long position-dollar 45,314 21,554 46,673
1,827
1,777 25,562
Long position-euro
47,091 47,116 48,500
21,380
25,505
46,885
-
-
-
-
-
-
-
-
-
f) Sensitivity analysis
For the derivatives shown in item e)(1) above, the Company’s Man-
agement understands that no sensitivity analysis should be performed,
as there are equivalent liabilities recorded in the balance sheet, offset-
ting the transactions, as shown in the following table:
Total loans and financing in foreign currency
Adjusted value of contracted financial derivatives
192,092
(187,381)
4,711
Foreign exchange risk
Similarly, the Company believes that the operating derivatives shown
in item e)(2) should not be taken into account in the sensitivity analy-
sis, as they were settled on January 6, 2009.
Therefore, the sensitivity analysis will not be performed for the foreign
exchange derivatives position as of December 31, 2008 by the Com-
pany and its subsidiaries.
The Company and its subsidiaries have no derivatives for speculative
purposes.
g) Credit risk
The sales of the Company and its subsidiaries are made to a large num-
ber of Natura beauty consultants and this risk is managed through a
strict credit granting process. The result of this management is reflected
under the allowance for doubtful accounts, as shown in note 6.
The Company and its subsidiaries are also subject to credit risks re-
lated to the financial instruments entered into while managing their
businesses. The risk of default on transactions with the financial institu-
tions with which they operate, which are considered prime banks by the
market, is considered low.
23. FINANCIAL INCOME (EXPENSES)
Financial income:
Interest on cash investments
Inflation and exchange gains (a)
Gains on swap and forward
transactions (b)
Other financial income
Financial expenses:
Interest on financing
Inflation and exchange losses (a)
Losses on swap and forward
transactions (b)
Other financial expenses
Company
2008
2007
Consolidated
2007
2008
7,985
7,911
442 13,561
35,912 27,330
5,247 15,241
48,279
9,637
2,205
3,918
55,952
12,596
348
8,120
66,343 27,595
109,707 51,039
(14,581)
(63,945)
(5,731)
(57)
(37,958) (26,454)
(2,727)
(71,463)
- (25,140)
(948)
(5,585)
- (26,812)
(2,286)
(9,728)
(84,111) (31,876)
(119,149) (58,279)
The purpose of the account breakdowns below is to explain the results
of currency hedging transactions entered into by the Company, as well
as their contra entries recorded under financial income (expenses),
shown in the table above:
(a)
Inflation and exchange gains
Inflation and exchange losses
(a) Breakdown
Exchange rate changes on loans and financing
Adjustment for inflation on financing
Exchange rate changes on imports
Exchange rate changes on accounts payable
in subsidiaries abroad
Exchange rate changes on export receivables
(b)
Gains on swap and forward transactions
Losses on swap and forward transactions
(b) Breakdown
Exchange rate changes on swaps
Exchange rate changes on forwards
Swap and forward derivatives adjusted to fair value
Income from foreign exchange coupon swaps
Financial costs of swaps
Financial costs of forwards
Consolidated
2007
2008
5,247 15,241
(2,727)
(71,463)
(66,216) 12,514
(72,387) 14,451
(1,125)
(28)
(796)
(919)
(6,399)
1,112
14,285 (1,896)
(66,216) 12,514
55,952
348
- (26,812)
55,952 (26,464)
71,577 (14,926)
13,160 (3,337)
2,101
1,601
(16,140) (11,498)
(405)
(3,118)
(13,942)
4,415
55,952 (26,464)
24. OTHER OPERATING INCOME (EXPENSES)
Other operating income:
Gain on sale of property, plant
and equipment
Untimely used PIS and
COFINS credits (*)
Other
Other operating expenses-
Other
Other operating income
(expenses), net
Company
2008
2007
Consolidated
2007
2008
722
685
281
512
30,921
-
-
-
30,921
-
-
3,461
-
(4,766)
(2,849)
-
30,738 (4,081)
28,353
3,973
(*) In the second quarter of 2008, the Company recorded untimely used PIS
and COFINS credits arising from expense, costs and charges related to its rev-
enues, incurred from May 2004 to December 2007, in the amounts of R$5,516
and R$25,405 for PIS and COFINS, respectively, totaling R$30,921. Such cred-
its were generated based on the new interpretation made by the Company of
certain provisions of Law No. 10,865/04, which definitely changed the taxation
system of such taxes on the revenues earned by the Company. The untimely
used PIS and COFINS credits were fully offset against other federal taxes in
July and August 2008.
25. INSURANCE
The Company and its subsidiaries contract insurance based principally
on risk concentration and significance, at amounts deemed sufficient by
Management, taking into consideration the nature of their activities and
the opinion of their insurance advisors. As of December 31, 2008, in-
surance coverage is as follows:
Item
Type of coverage
Insured amount
Industrial complex/
inventories
Vehicles
Loss of profits
Any damages to buildings,
acilities and machinery and
equipment
Fire, theft and collision
for 1,529 vehicles
Nonrealization of profits arising
from damages to facilities,
buildings and production
machinery and equipment
688.519
51.728
925.121
annualreportnatura
84 85
Independent Auditors’ Report
To the Management and Shareholders of Natura Cosméticos S.A
São Paulo - SP - Brazil
DNV Assurance Statement Summary
Natura Sustainability Report 2008
1. Context and responsibilities
1. We have audited the accompanying individual (Company) and consolidated balance sheets of Natura Cosméticos S.A. and subsidiaries as
of December 31, 2008 and 2007, and the related statements of income, changes in shareholders’ equity (Company), cash flows and value added
for the years then ended, all expressed in Brazilian reais and prepared under the responsibility of the Company’s Management. Our responsi-
bility is to express an opinion on these financial statements.
2. Our audits were conducted in accordance with auditing standards applicable in Brazil and comprised: (a) planning of the work, taking into
consideration the significance of the balances, volume of transactions, and the accounting and internal control systems of the Company and its
subsidiaries; (b) checking, on a test basis, the evidence and records that support the amounts and accounting information disclosed; and (c) eval-
uating the significant accounting practices and estimates adopted by Company’s and its subsidiaries’ Management, as well as the presentation of
the financial statements taken as a whole.
3. In our opinion, the financial statements referred to in paragraph 1 present fairly, in all material respects, the individual (Company) and
consolidated financial position of Natura Cosméticos S.A. and subsidiaries as of December 31, 2008 and 2007, and the results of their opera-
tions, the changes in its shareholders’ equity (Company), their cash flows, and the value added in their operations for the years then ended, in
conformity with Brazilian accounting practices.
4. As mentioned in note 3, in view of the changes in Brazilian accounting practices, effective since the beginning of 2008, the individual
(Company) and consolidated financial statements for the year ended December 31, 2007, presented for comparative purposes, have been
adjusted and are being restated as prescribed by Accounting Standard and Procedure (NPC) 12 - Accounting Policies, Changes in Accounting
Estimates and Errors.
5. The accompanying financial statements have been translated into English for the convenience of readers outside Brazil.
São Paulo, February 18, 2009
DELOITTE TOUCHE TOHMATSU
Auditores Independentes
CRC nº 2 SP 011609/O-8
Altair Tadeu Rossato
Engagement Partner - CRC nº 1 SP 182515/O-5
Det Norske Veritas (DNV) has carried out an independent verification of the Portuguese version of Natura Cosméticos SA (Natura)
Sustainability Report 2008 (‘the Report’). The Board of Natura is responsible for all information provided in the Report as well as the processes
for collecting, analysing and reporting that information. DNV’s responsibility regarding this verification is to Natura only, in accordance with the
scope of work agreed. DNV disclaims any liability or responsibility to a third party for decisions, whether investment or otherwise, based upon
this Assurance Statement summary, or its full version available in Portuguese at www.natura.net/relatorio.
2. Independence
DNV was not involved in the preparation of any statements or data included in the Report, except for this Assurance Statement summary
and its full version available in Portuguese at www.natura.net/relatorio. Moreover, in 2008, DNV did not work with Natura or its stakeholders
on any engagements which could compromise the independence or impartiality of our findings, conclusions or recommendations.
3. Scope and limits of the verification
The scope of the verification included information provided in the Report for the period of 12 months ending on December, 31st 2008.
In particular, the scope of work included the verification of:
(cid:129) Sustainability related policies, strategies, objectives and achievements in 2008 described in the Report;
(cid:129) Sustainability management systems, practices and performance at group level, focusing on the management of sustainability along
the value chain, with a focus on supply chain and innovation matters;
(cid:129) Adoption of Natura’ sustainability-related policies, practices and procedures by one of Natura’s international businesses (Argentina);
(cid:129) Sustainability-related initiatives and projects described in the Report;
(cid:129) Processes and activities undertaken with a view to identifying and assessing material sustainability issues;
(cid:129) Processes and activities carried out in order to identify, analyze and respond to stakeholders’ expectations in relation to the content
of the Report and the company’ sustainability strategy;
(cid:129) Systems, processes and tools to collect, aggregate, control/assure the quality of data and report sustainability-related information;
(cid:129) Accuracy, completeness, comparability and neutrality of statements and sustainability performance data, in particular those related
to carbon emissions;
(cid:129) Adherence to the principles of materiality, completeness, accuracy, reliability, neutrality, clarity and comparability set out in the
Global Reporting Initiative Sustainability Reporting Guidelines, 2006 (GRI G3). This also included a check of the application level declared
by Natura.
The findings, conclusions and recommendations which resulted from the verification of information related to GHG emissions, included
in the section “Carbon Neutrality” of the Report, are provided in the full version of the Assurance Statement, available in Portuguese
at www.natura.net/relatorio.
This verification aimed to provide assurance relating to the sustainability information and data presented in the Report. DNV’s scope of work
did not include an assessment of the adequacy, effectiveness or efficiency of Natura’s strategy or management of sustainability issues. It also
excluded the verification of sustainability management, performance or reporting practices by Natura’s suppliers or any other third parties
mentioned in this Report.
annualreportnatura
86 87
4. Approach and methodology
This verification was carried out between January and March 2009, by suitably qualified and experienced professionals, following DNV’s
Protocol for Verification of Sustainability Reports. DNV’s Verification Protocol has been developed in accordance with the most widely
accepted reporting and assurance standards, including AccountAbility’s AA1000 Assurance Standard (2008) and the GRI Sustainability
Reporting Guidelines, 2006 (GRI G3).
The methods used in this verification included:
(cid:129) Visits to selected sites in Brazil (headquarters and factory at Cajamar, Casa Natura Campinas) and Argentina (administrative offices
in Buenos Aires);
(cid:129) Interviews with more than 35 directors and managers responsible for various areas and processes at the above mentioned sites;
(cid:129) Analysis of developments in the company’s commitments, activities and resources allocated to sustainability;
(cid:129) Review of sustainability-related reports, data and data management systems;
(cid:129) Testing of a sample of sustainability data and data management systems (for collection, aggregation, quality control/assurance
and reporting);
(cid:129) Review of internal and external communications regarding Natura’s commitment, approach and performance on sustainability.
5. Main conclusions
Based on the work undertaken as part of this verification, in DNV has drawn the following main conclusions:
(cid:129) Natura Sustainability Report 2008 provides an accurate and fair representation of the policies, strategies, management systems,
initiatives and projects carried out by the company over the reporting period;
(cid:129) The Report meets the content and quality requirements of the GRI Sustainability Reporting Guidelines, 2006 (GRI G3);
(cid:129) Natura adopted a structured approach to defining materiality and ensuring inclusivity and responsiveness in its Report, in line with
AA1000AS principles;
(cid:129) The 2008 version of the Report shows improvement compared to the previous version in terms of its structure, accuracy and clarity
of the reported information, as well as quality of the translation of the original version into English.
Detailed information on DNV’s verification process, conclusions and recommendations is provided in the full Assurance Statement available
in Portuguese at www.natura.net/relatorio.
Antonio Ribeiro
Lead verifier
Jasmin Eymery
Verifier
Det Norske Veritas, São Paulo, 01 June 2009
About the Report
For the ninth edition of the Natura Annual Report, which refers to the
period between January 1 and December 31, 2008, we adopted once
again the G3 version of the Global Reporting Initiative (GRI) guidelines
at the A+ application level, the highest level for reporting economic, social
and environmental performances.
We gathered information on all of our operations, including Argentina,
Chile, Colombia, Mexico, Peru, Venezuela and France, with most attention
to the activities carried out in Brazil, where our production are centralized
and, thus where our social and environmental impacts are stronger. The
economic results include all operations. We also offer information on our
relationships in Brazil with our main stakeholders: those who we define
as brand builders – employees, consultants, consumers, suppliers and
supplier communities – and the other three stakeholder groups that
we consider directly interested in this publication – surrounding
communities, government and shareholders.
For the second consecutive year, the socioenvironmental information was
verified by means of the independent auditors Det Norske Veritas (DNV),
which also verified the greenhouse gas inventory data. The economic and
financial information, on the other hand, was audited by Deloitte Touche
Tohmatsu Auditores Independentes. We publish the opinions of both
external auditors.
In order to allow for a broader access to the Natura Annual Report 2008,
we have used different formats and communication channels:
(cid:129) Book for opinion makers – the main printed publication, with the most
relevant information on our performance in Portuguese, English and Spanish.
(cid:129) Internet – presents the complete content in Portuguese and English.
Access our electronic address www.natura.net/relatorio.
(cid:129) Newspaper for employees – with the topics of interest to our internal
stakeholders in Portuguese and Spanish.
(cid:129) Magazine for consultants – it gathers specific information for our sales
force, in Portuguese only.
The content of each means of communication is determined by a
materiality assessment, which seeks to identify the relevant topics for our
report by crossing two axles: Natura’s strategy and the interests of the
main stakeholders. Three sources of information have contributed to this
analysis: the contacts received by Natura’s Ombudsman´s Office in 2008,
the corporate process for the engagement of stakeholders, and the
consultation with specialists, which was held in Brazil in December.
On December 5, at the Natura House in Campinas, state of São Paulo,
we gathered some 50 people, including employees, consultants, suppliers,
consumers and investors of Natura. The participants were invited to
identify opportunities in their relationship with Natura and the
commitments that, in their opinion, should be made by the Natura
Community (the company and its stakeholders). These demands were
disseminated to managers and taken into consideration in the strategic
planning process in 2009.
To make improvements in our sustainability reporting, we also organized
a consultation with specialists to obtain a more critical opinion and
suggestions on how to improve the content of the Annual Report 2007.
These specialists were: Enrique Svirsky, founding partners of the Instituto
Socioambiental (Socioenvironmental Institute); Nelmara Arbex, training
director of GRI; Regina Queiroz, researcher of the Instituto Observatório
Social (Social Observatory Institute); Ricardo Voltolini, journalist and
director of the consulting company Idéia Sustentável; Roberta Kuruzu,
executive director of the Brazilian Association of Direct Selling
Companies; and Roberto Gonzáles, from the Association of Capital
Market Investment Analysts and Professionals.
We also took into consideration the recommendations of the study “Road
to Credibility”, conducted by the British consulting firm SustainAbility and
the Brazilian Foundation for Sustainable Development (FBDS), in which
we appeared as a leading company in sustainability reporting in Brazil.
Commitments with External Initiatives
Throughout the Annual Report we have listed many entities of which
we are a member and we also support several global and national
initiatives that reflect our corporate behavior and are in line with our
actions and beliefs.
In addition to the commitments highlighted in the 2007 annual report,
such as the Sustainable Amazon Forum (FAS), Global Compact, Union
for Ethical BioTrade, Ethos Institute, Empresa Amiga da Criança (Child-
Friendly Company), this year, we highlight our support for the Our São
Paulo Movement, a civil society initiative in São Paulo motivated to
manage the problems of urban life; and the Sustainable Connections
project, promoted by FAS and the Our São Paulo Movement whose
objective is to debate and publicize the responsibilities of companies
in São Paulo on issues related to the Amazon, in addition to adhering
to the Business and Biodiversity Initiative, an initiative led by the
German Ministry of the Environment and supported by GTZ for
the purpose of engaging the private sector behind the objectives
of the Convention on Biological Diversity (CBD).
We present in the table below the main suggestions from the more than 100 suggestions for improvement we received on our sustainability reporting
and the answers we have given in this edition:
Stakeholder
Specialists
Specialists
Specialists
Specialists
Stakeholder Panel
Stakeholder Panel
Request
Natura’s Answer
There is little information on third parties, particularly, on
the commitment of suppliers to sustainability issues. Show
the value chain.
We have included a map of our value chain on page 11.
Present more specific and quantitative targets and explain
how they were determined.
The targets will be determined after the completion of the
strategic planning and published in the online version in May 2009.
Discuss the direct sales model.
Please read chapter Social Value Creation on page 44.
Report on the process used to identify relevant topics.
Priority topics are presented on page 10 and the process
is explained in this chapter.
Present plans to improve Natura’s communication with
consultants. .
See chapter Consultants on page 31.
Describe more completely the post-consumption
recycling process.
The post-consumption recycling process is still a pilot
program and it is presented in the online version.
For further information on this report, please directly contact the team responsible for its preparation via e-mail: relatorioanual@natura.net
annualreportnatura
88 89
Global Compact Principles
Since July 2000, Natura has been a subscriber of the Global Compact, a UN
initiative that brings together companies, workers and civil society to promote
sustainable growth and civic awareness. We are also part of the Global
Compact Brazilian Committee (CBPG), created from the partnership
between the Ethos Institute and the UN Development Programme
established in 2003. The CBPG is made up of companies, UN agencies in
Brazil, legal entities, academia and civil society organizations that develop
work related to topics such as human and labor rights, the environment
and combating corruption.
For further information on this initiative, please visit www.globalcompact.org
Global Compact
Principles
GRI relevant
indicators
GRI indirectly
relevant
indicators
Human Rights
Principles
Principle 1 –
Respect and protect
human rights.
HR1; HR2; HR3; HR4;
HR5; HR6; HR7; HR8;
HR9
LA4; LA13; LA14; SO1
HR1; HR2; HR8
Principle 2 –
Prevent human
rights violations.
Principles of
Working Rights
Principle 3 – Support HR5; LA4; LA5
freedom of association
in the workplace.
Principle 4 –
Abolish forced labor.
Principle 5 –
Abolish child labor.
HR7
HR6
HR1; HR2; HR3
HR1; HR2; HR3
Principle 6 –
Eliminate discrimination
in the workplace.
HR4; LA2; LA13; LA14 HR1; HR2; EC5; EC7;
LA13
Principles of
Environmental Protection
Principle 7 – Support a
preventive approach to Performance Chaptel
environmental challenges.
Environmental
EC2
EN2; EN5; EN6; EN7;
Principle 8 –
Promote environmental EN10; EN13; EN14;
EN18; EN21; EN22;
responsibility.
EN26; EN27; EN30
EC2; EN1; EN3; EN4;
EN8; EN9; EN11; EN12;
EN15; EN16; EN17; EN19;
EN20; EN23; EN24; EN25;
EN28; EN29; PR3; PR4
Principle 9 – Encourage EN2; EN5; EN6; EN7;
environmentally
friendly technologies.
EN10; EN18; EN26;
EN27
Anti-Corruption
Principle
Principle 10 – Fight
against corruption in
all of its forms, including
extortion and bribery.
SO2; SO3; SO4
SO5; SO6
WE ARE A STAKEHOLDER OF THE
GLOBAL REPORTING INITIATIVE (GRI)
AND SUPPORT ITS MISSION TO DEVELOP
GLOBALLY ACCEPTED GUIDELINES
FOR SUSTAINABILITY REPORTS
THROUGH A PROCESS OF
STAKEHOLDER ENGAGEMENT.
GRI Index
In order to locate our performance indicators according to the GRI standard, please refer to the table below. The general indicators
are available in the online version at www.natura.net/relatorio. Further information on the GRI model can be obtained from the
www.globalreporting.org website.
Economic Performance
Economic Management Approach
EC1
EC2
Direct economic value generated and distributed
Financial implications, risks and opportunities resulting
from climate changes
Coverage of the benefit pension plan obligations
Significant financial aid received from the government
EC3
EC4
Market Presence
EC5
EC6
EC7
Lowest salary compared to the local minimum salary
Policies, practices and expenses with local suppliers
Procedures for local contracting and proportion of top management
members recruited in the local community
Indirect Economic Impacts
EC8
EC9
Investments in infrastructure and services
Description of indirect economic impacts
Environmental Performance
Environmental Management Approach
Percentage of materials used from recycling
Indirect energy use
Energy saved through efficiency
Initiatives for suppliers of energy efficient products
Reduction of indirect energy use
Materials
EN1 Materials used
EN2
Energy
EN3 Direct energy
EN4
EN5
EN6
EN7
Water
EN8
EN9 Water sources affected by water removal
EN10 Water recycled and reused
Biodiversity
EN11 Area within the protected areas or those adjacent to
Total water removal
protected areas, as well as areas with a high level of
biodiversity outside the protected areas
EN12 Description of significant impacts on biodiversity
EN13 Protected or restored habitats
EN14 Management of impacts on biodiversity
EN15 Species threatened with extinction
Emissions, Effluents and Waste
EN16 Total direct and indirect emissions of greenhouse gases
EN17 Other relevant indirect emissions of greenhouse gases
EN18 Initiatives to reduce greenhouse gas emissions
EN19 Emissions of substances that destroy the ozone layer
EN20 NOx, SOx and other significant atmospheric emissions
EN21 Total disposal of water by quality and destination
EN22 Total waste weight by type and disposal method
EN23 Number and total volume of significant spills
EN24 Transported, imported or exported wastes
EN25 Bodies of water and habitats affected by water disposal
Products and Services
EN26 Initiatives to mitigate the environmental impacts of products and services
EN27 Percentage of products and their packaging that are recovered in relation
to the total amount of products sold
Conformity
EN28 Significant fines and the total number of non-monetary sanctions resulting
from the non-conformity with laws and environmental regulations
Transportation
EN29 Impacts of the transportation of products and workers
General
EN30 Investments and expenses with environmental protection
Social Performance – Labor Practices and Dignified Work
Management Approach to Labor Practices
Percentage of workers covered by collective bargaining agreements
Employment
Total number of workers by type of job, employment contract and region
LA1
Total number of employees and turnover rate
LA2
LA3
Full-time vs. temporary benefits
Relations between Workers and the Government
LA4
LA5 Minimum deadline for notifying operating changes
Safety and Health in the Workplace
LA6
LA7
LA8
Employees represented on health and safety committees
Injury rates, occupation diseases, days lost, absenteeism and deaths
Education, training, counseling, prevention and risk control programs
for employees, their family members or members of the community
associated with serious diseases
Health and safety topics covered in labor union agreements
LA9
Page
44
35 and 44
10 and 49
On-line
On-line
29
39
On-line
43
35 and 44
49
On-line
54
On-line
On-line
On-line
On-line
On-line
53
53
53
On-line
50
On-line
50
On-line
51
12
On-line
On-line
47
27
27
27
On-line
On-line
On-line
On-line
On-line
On-line
On-line
49
49
10, 33, 35 and 49
49
49
49
49
On-line
On-line
On-line
Social Performance – Labor Practices and Dignified Work
Training and Education
LA10 Average hours of training
LA11 Programs for employability
LA12 Performance analysis and career development
Diversity and Equal Opportunities
LA13 Composition of groups responsible for corporate governance
and the other employees
LA14 Base salary proportion between men and women
Social Performance – Human Rights
Management Approach to Human Rights
Investment and Purchase Process Practices
HR1
HR2
Significant investment contracts with clauses on human rights
Companies contracted and critical suppliers submitted to
evaluations on human rights
Training in human rights
HR3
Non-Discrimination
HR4
Freedom of Association and Collective Bargaining
HR5 Operations in which the right to exercise the freedom of association
Total number of discrimination cases
and collective bargaining may be at risk
Child Labor
HR6 Operations with a risk for child labor
Forced or Slave Labor
HR7 Operations with a risk for forced or slave labor
Safety Practices
HR8
Indigenous Rights
HR9
Cases of indigenous rights violations
Security personnel submitted to training in human rights
Page
29
On-line
On-line
26
26
25 and 33
33
33
On-line
On-line
On-line
33
31 e 33
On-line
On-line
Social Performance – Society
Social Management Approach
24, 40, 42 and 44
Employees trained in anti-corruption policies and procedures
Programs and practices to evaluate and manage the impacts
Community
SO1
of the operations in the communities
Corruption
SO2 Units submitted to evaluations of corruption risks
SO3
SO4 Measures taken in response to cases of corruption
Public Policies
SO5
SO6
Unfair Competition
SO7
Conformity
SO8
Lawsuits due to unfair competition
Participation in the elaboration of public policies and lobbies
Financial contributions to political parties
Fines and non-monetary sanctions resulting from non-conformity
with laws and regulations
Social Performance – Responsibility for the Product
Management Approach to Responsibility for the Product
Customer Health and Safety
PR1
Evaluation of the impacts on health and safety during the lifecycle
of products and services
Cases of non-conformity with health and safety regulations
PR2
Product and Service Labeling
Labeling procedures
PR3
Cases of non-conformity with regulations on labeling
PR4
PR5
Practices related to customer satisfaction
Communication and Marketing
PR6
Compliance with laws, norms and voluntary marketing codes,
including publicity, promotion and sponsorship
Cases of non-conformity with regulations
PR7
Conformity
PR8
Compliance
PR9
Proven complaints on the violation of privacy
Fines due to non-conformity with laws and regulations associated
with the supply and use of products and services
51
22
On-line
22
42
42
On-line
On-line
11 and 37
38
38
37
37
37
37
37
31
37
View the indicator or complement
by visiting: www.natura.net/relatorio
annualreportnatura
90 91
Editorial Team
Art Direction and Graphic Design:
Modernsign Design e Inovação
Writing and Proofreading:
Report Comunicação
Image Treatment and Prepress:
Modernsign Design e Inovação
Printing:
Makrokolor
Photography:
Arnaldo Pappalardo (page 30); Daniela Giorgia Spinardi (page 49);
Edu Simões (page 4); Rafael Quintino (pages 25 and 36); Taterka
(pages 15 and 23);Wilson Spinardi Junior (cover and pages 1, 2, 3,
8, 9, 16, 20, 26, 34, 42, 45 and 55)
Illustrations:
Modernsign Design e Inovação and Marcelo Cipis (pages 11 and 12)
Survey and Determination of Indicators and Support for the
Identification of Content:
Sustainability Office, and Finance and Legal Affairs Office
General Coordination:
Corporate Affairs and Government Relations Office
This report was elaborated in GillSans, with the cover printed on Couché
Suzano Matte 230 g/m2 paper and the body printed in 150 g/m2. A total of
4,000 copies of this edition were printed in portuguese, 1,000 in english
and 1,500 in spanish.
THE USE OF MORGAN STANLEY CAPITAL INTERNATIONAL INC.'S ("MSCI") TRADEMARKS AND INDEX NAMES DOES NOT
CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION BY MSCI, ANY OF ITS AFFILIATES, ANY OF ITS INFORMATION
PROVIDERS OR ANY OTHER THIRD PARTY INVOLVED IN, OR RELATED TO, COMPILING, COMPUTING OR CREATING ANY MSCI
INDEX. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES ARE TRADEMARKS
OF MSCI OR ITS AFFILIATES AND HAVE BEEN LICENSED FOR USE FOR CERTAIN PURPOSES BY NATURA.